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How long can parks survive with zero revenue?

WillPS said:
Having thought about it a bit, I very much doubt the Kirk Kristiansen family would let their £3bn investment sink over £200-300m in cash flow. I expect they or Blackstone will inject the cash needed to survive.
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Do you mean in terms of keeping the parks profitable, or in terms of future investments?

Also, I think that Merlin now being private may help them somewhat, as the stock prices of some of the top theme park companies at the moment make for grim reading; I'd imagine that a public company's stock price has at least some bearing on its performance & stability.
 
bluesonichd said:
unless they think stuff the parks and close them, we just going to keep the lego brand going
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Surely they wouldn't have bought the company if that was their intention, though? When the takeover was first announced, they said that they wanted to capitalise on the potential of all parts of Merlin.
 
Matt N said:
Do you mean in terms of keeping the parks profitable, or in terms of future investments?

Also, I think that Merlin now being private may help them somewhat, as the stock prices of some of the top theme park companies at the moment make for grim reading; I'd imagine that a public company's stock price has at least some bearing on its performance & stability.
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The situation as I understand is that Merlin are quickly approaching the position where their available monies (cash in the bank, as well as unused loan facilities and other finance) are no longer able to service their liabilities (including lease payments, loan repayments and the cost of making your staff redundant). In the UK, that means Merlin is facing Insolvency.

If they continue to approach insolvency they will be bound by law to appoint an insolvency practitioner, who are regulated persons working for an external accounting firm. Their job is to guide the business away from insolvency (and in doing so they might use legal protections you have heard of like Administration and Company Voluntary Arrangements, which protect the business from being rendered insolvent by any stakeholder(s)). If they are unable to successfully prevent the business from becoming insolvent, they are duty bound to place the company in Liquidation, which is the legal procedure by which a company is dismantled of its assets and creditors (stakeholders owed money) are reimbursed. Once this process is finished (which in the case of big companies typically takes many years) the company is Dissolved, formerly ending its existence as a legal entity.

Crucially though, the role of an insolvency practitioner is to work in the best interests of all stakeholders - including but not prioritising shareholders. This means the shareholders would no longer be able to exert their influence in the same way the owners of a business usually can.

You're right in what you say about them being helped by now being a private organisation, because ultimately so long as their parent companies are interested in keeping the business operational (and protecting their investments) and their own funding is such that they can make it happen, they will continue to inject cash in to the business to protect their investment. Especially so soon after making an investment valued at £6bn, it seems unlikely they'd want to lose out based on a few hundred mil.

As for whether this has consequences for investment in the business once operations can resume... who knows! If the shareholders decide to make them work with whatever cash reserves they have at that point, the parks are going to have some very tough years while they build up cash reserves. If they decide to inject another load of capital to trigger a wave of investments, the scene could be very interesting indeed. Neither is a foregone conclusion based on the current scenarios, and both pose significant risks to the company and its parents.
 
WillPS said:
The situation as I understand is that Merlin are quickly approaching the position where their available monies (cash in the bank, as well as unused loan facilities and other finance) are no longer able to service their liabilities (including lease payments, loan repayments and the cost of making your staff redundant). In the UK, that means Merlin is facing Insolvency.

If they continue to approach insolvency they will be bound by law to appoint an insolvency practitioner, who are regulated persons working for an external accounting firm. Their job is to guide the business away from insolvency (and in doing so they might use legal protections you have heard of like Administration and Company Voluntary Arrangements, which protect the business from being rendered insolvent by any stakeholder(s)). If they are unable to successfully prevent the business from becoming insolvent, they are duty bound to place the company in Liquidation, which is the legal procedure by which a company is dismantled of its assets and creditors (stakeholders owed money) are reimbursed. Once this process is finished (which in the case of big companies typically takes many years) the company is Dissolved, formerly ending its existence as a legal entity.

Crucially though, the role of an insolvency practitioner is to work in the best interests of all stakeholders - including but not prioritising shareholders. This means the shareholders would no longer be able to exert their influence in the same way the owners of a business usually can.

You're right in what you say about them being helped by now being a private organisation, because ultimately so long as their parent companies are interested in keeping the business operational (and protecting their investments) and their own funding is such that they can make it happen, they will continue to inject cash in to the business to protect their investment. Especially so soon after making an investment valued at £6bn, it seems unlikely they'd want to lose out based on a few hundred mil.

As for whether this has consequences for investment in the business once operations can resume... who knows! If the shareholders decide to make them work with whatever cash reserves they have at that point, the parks are going to have some very tough years while they build up cash reserves. If they decide to inject another load of capital to trigger a wave of investments, the scene could be very interesting indeed. Neither is a foregone conclusion based on the current scenarios, and both pose significant risks to the company and its parents.
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Ah right; thank you very much for the extremely informative post @WillPS! So in basic terms, would I be right in saying that Merlin is close to going bankrupt unless KIRKBI et al invest capital into it?
 
Matt N said:
Ah right; thank you very much for the extremely informative post @WillPS! So in basic terms, would I be right in saying that Merlin is close to going bankrupt unless KIRKBI et al invest capital into it?
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According to the Telegraph, yes.

If you look at the figures I posted in the OP (based on depleting cash reserves in 2018) it's not hard to come to the same conclusion.
 
This is really difficult to call unless you have access to the inner workings of the company and its agreements with various vendors. With the leasebacks, for example, everything I recall reading in the shareholder info that got sent out suggested they were pretty well structured, with a number of indemnities and the like.

Not sure what other governments are doing, but the UK response will be pretty helpful to Merlin on a number of fronts.

There is light at the end of the tunnel, some of the Japanese attractions have begun to reopen, which is why they were always aiming for the three-way split between the US, Europe and elsewhere.

As referenced above, KIRKBI and Blackstone have just waded into this, they'll be working to find a way.
 
It's worth considering that for all operators the end of the closed season marks the low-point in terms of cash reserves, as maintenance and recruitment costs (plus any investments) sap away at operating capital but gate income is low or nil. This is one reason why parks like to push season tickets off-season, bringing forward a significant chunk of revenue.
 
I know of a certain seaside park that has had to be bailed out by government, be it local, regional, national, or even international, to stop it going bust, as it was a major local employer.
More than once.
Allegedly.
 
rob666 said:
I know of a certain seaside park that has had to be bailed out by government, be it local, regional, national, or even international, to stop it going bust, as it was a major local employer.
More than once.
Allegedly.
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Margate?
 
rob666 said:
I know of a certain seaside park that has had to be bailed out by government, be it local, regional, national, or even international, to stop it going bust, as it was a major local employer.
More than once.
Allegedly.
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It's a trickier sell when the entire industry which presumably depended on that seaside park is also struggling though.

Councils only have so much capital themselves.
 
I actually meant Blackpool, but Margate would fit as well.
Delays on repayments, taxes, interest free loans with lengthy repayment holidays...these things happen in a crisis.
Least cost to government compared to mass unemployment in deprived areas.
 
That's another thought; could governments intervene to try and save the parks, if the financial situation gets particularly bad? For a local economy, I'd imagine that a theme park (especially a major one, such as a Merlin park or Blackpool) is both a major employer and a key driver of tourism. Surely the council would rather that the park stays open than have both employment level and tourism in that borough plummet with its closure?
 
Matt N said:
That's another thought; could governments intervene to try and save the parks, if the financial situation gets particularly bad? For a local economy, I'd imagine that a theme park (especially a major one, such as a Merlin park or Blackpool) is both a major employer and a key driver of tourism. Surely the council would rather that the park stays open than have both employment level and tourism in that borough plummet with its closure?
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They could, but it's worth remembering that *a lot* of businesses are going to struggle to avoid insolvency and the government has to be seen to be acting fairly across the board.

A legitimate argument being used against the airline industry is that if these companies fail their profitable assets will quickly be swallowed up by new companies - meaning that it's plausible that the same staff will be flying the same aircraft to and from the same airports when this is done. The government will have to ask the question - what is the real cost of allowing these businesses to go in to administration? Realistically it's unlikely that (say) BPB calling in administrators would result in a firesale of the park's assets. The park would (probably!) still be there waiting to reopen, the only difference would be who was in charge and/or what their immediate financial obligations were.

I can also see a lot of companies using Adminstration as a means to protect themselves from action from creditors during these tough time - indeed this appears to be what Debenhams are doing today (it's likely the same organisations will own Debenhams at the end of this, but because they are now/will soon be in Administration they are immune from any stakeholder actions which would render them insolvent). It's also a way of getting rid of unprofitable parts of the business or commitments which are no longer viable, as the Administrator can sell parts of the business off separately.
 
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Interesting Blooloop article on the Belgian park Bellewaerde:

https://blooloop.com/news/bellewaerde-safety-plan-for-reopening-covid-19/

- They reckon in April alone, they’ll lose nearly €4m in revenue in a year when they’d made a (rare-ish) major investment in a family coaster that can’t open.
- When the park eventually reopens, daily visitor numbers will be capped at 4,000, staff will all wear facemasks, social distancing will be enforced in queuelines while people can expect long waits for rides as all restraints will be disinfected after every cycle.
 
I think this year when/if the parks open, I think I might support and do the smaller parks. It seems only fair the bigger parks will come out of this just about. But it’s the smaller parks for the long term future are the ones I’m concerned about for now.
 
In terms of the future, Cedar Fair has today outlined a plan for COVID-19 and what the future will hold: https://ir.cedarfair.com/news/news-...es-Taken-in-Response-to-COVID-19/default.aspx
If you'd like it summarised a little more, here's a video from Amusement Insiders:

The key thing to note is that the company is reducing CAPEX spending on 2021 investments, but still expects to spend around $85-100m on 2021 additions, compared to $190m in a regular year. So while I think we'll see investments reduce, I don't think they'll dry up entirely (on a general scale as opposed to merely within Cedar Fair).
 
In the case of Blackpool, they are shut and workers presumably furloughed

So they are probably not losing as much money as they usually do :)
 
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