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REGISTER VIEWPOINT: Cedar Fair buys some time

Commentary • Apr 15, 2010 at 1:40 AM

Cedar Fair's Apollo project suffered from a failure to launch, after unitholders forced an abort.

That leaves the amusement park giant, owners of Cedar Point and Kings Island and other big parks across the country, in the same situation as before:How to get out from under a a debt, incurred when things still looked good and the amusement industry strong and the purchase of Paramount Parks (former owners of Kings Island) looked like a good idea?

In that, Cedar Fair is different only in degree from the millions of homeowners who, as the real estate bubble popped, found themselves owing more on their homes than the suddenly devalued structures were worth. For the little guy who can't afford to keep leveraging, the only options are to suck it up, sell the house at a loss or, in extremis, walk away and mail the keys to the bank holding the mortgage.

For something the size of Cedar Fair, "jingle mail" is simply not an option. The "mortgage holders" include not only the big financiers but the majority unitholders whose votes speak loudly and the individual unitholders who stood on the sidewalk in front of the State Theatre.

But the economy is recovering -- we're constantly assured of this -- and there are options available that weren't there six months ago, perhaps options that unitholders will like better.

But Project Apollo sent up a signal to players in the financial world that stock in Cedar Fair was selling for maybe less than it should be, and any self-respecting shark knows what to do about the smell of blood in the water.

Cedar Fair was wise, in that regard, to insert so-called "poison pill" language that, among other things, allows investors to dilute the value of the holdings of anyone who amasses enough unit value to attempt a hostile takeover. The financial equivalent of a nuclear missile in the silo, the poison pill is a rarely used deterrent that has protected many companies from being bought, chopped and sold as parts.

But the poison pill simply buys time. Cedar Fair still has work to do, and that work is to come up with options that gets the company out from under its debt while preserving value for unitholders -- in other words, not selling the house at a loss.

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