SeaWorld Entertainment, Inc. Reveals New Senior Notes Pricing and Obtains Term Loan and Revolving Credit Commitments

On Aug. 13, SeaWorld Entertainment, Inc. (NYSE: SEAS) announced pricing for a $725 million aggregate principal amount offering of 5.25% senior notes, due 2029, for its direct, wholly-owned subsidiary SeaWorld Parks & Entertainment, Inc., priced at 100% of the notes’ par value.

The $725 million aggregate principal amount was downsized from the $825 million amount initially announced on Aug. 12.

SeaWorld Entertainment, Inc. will fully and unconditionally guarantee the notes; any subsidiary of the company that directly or indirectly owns 100% of the issued and outstanding equity interests of SeaWorld Parks & Entertainment, Inc.; and each of the subsidiaries that guarantee its existing senior secured credit facilities.

They are being offered only to persons reasonably believed to be qualified institutional buyers, in reliance on Rule 144A under the Securities Act of 1933, as amended. Outside of the U.S., the notes will only be available to non-U.S. investors pursuant to Regulation S.

The notes will not be registered under the Securities Act or any state securities laws and may not be offered or sold in the U.S. without registration or an applicable exemption from the Securities Act’s registration requirements and applicable state laws. Their sale was expected to close on Aug. 25, subject to customary closing conditions.

SeaWorld Entertainment, Inc. also announced on Aug. 13 that it had received $385 million in revolving commitments from revolving lenders. The lead arranger successfully allocated commitments for $1.2 billion in term loans from term lenders, upsized from $1.1 billion.

The company intends to use the proceeds from the notes’ issuance and the new term loans, in addition to cash on hand, to redeem a $450 million aggregate principal amount of outstanding SeaWorld Parks & Entertainment, Inc. 9.5% second-priority senior secured notes, due 2025.

SeaWorld Entertainment, Inc. also intends to use part of the proceeds to refinance SeaWorld Parks & Entertainment, Inc.’s existing term loan facility, and revolving credit facility, and pay related offering and refinancing expenses.

Quarterly Revenue Increase and Other Achievements

Following a strong fiscal year first quarter—which included generating positive adjusted net cash flow and an increased adjusted EBITDA—SeaWorld Entertainment, Inc. also released its second-quarter financial results earlier this month.

Notably, the company’s revenue, net income, and adjusted EBITDA all reached record levels in the second quarter.

“Our strong financial performance through the first half of the year underscores both the resilience of our business and our commitment to emerge from this extraordinary environment as an even stronger and more profitable business,” Mark Swanson, Chief Executive Officer of SeaWorld Entertainment, Inc., said. “During the second quarter, we also generated record Free Cash Flow that further bolsters our already strong balance sheet. Our pricing and product strategies, along with the strong consumer demand environment, continued to drive higher realized pricing and strong guest spending, resulting in record total revenue per capita in the quarter.”

The company’s second-quarter results also featured the following highlights:

• A total of 5.8 million guests visited SeaWorld—an increase of 5.5 million from 2020’s second quarter. Due to the impact of COVID-19-related factors, including capacity limitations and/or modified/limited operations that were in place at parks during part of the first half of the year, attendance showed a decline of 0.7 million guests (10.1%), compared to the same quarter in 2019.

• SeaWorld netted a record total revenue of $439.8 million—a $421.8 million increase from the second quarter of 2020 and $33.8 million more (8.3%) than 2019’s second quarter. The growth is attributed primarily to increases in admission per capita and in-park per capita spending and is partially offset by the decline in attendance.

• SeaWorld revealed a record-setting net income of $127.8 million, an improvement of $258.8 million from the second quarter of 2020. Net income is also up $75.1 million (42.7%) from the second quarter of 2019.

• An adjusted EBITDA— positively impacted by an increase in total revenue and decreased operating expenses and general, administrative, and selling expenses—was a record $218.8 million. This figure is an increase of $272.7 million from 2020’s second quarter. Compared to the second quarter of 2019, adjusted EBITDA increased by $69.1 million (46.2%).

• Total revenue per capita saw a 14.2% increase, hitting a record $75.71, compared to 2020’s second quarter—and was 20.5% higher than in 2019’s second quarter.

• Thanks to the company’s strategic pricing efforts and the net impact of their admissions product mix, admission per capita jumped 16.5% to $41.87. Compared to the second quarter of 2019, admission per capita increased 18.8%.

• In-park per capita spending lept 11.6% to $33.84, an increase over the same period in 2020. The company identified an increase in guest spending, higher realized prices and fees, an improved product mix, new or enhanced and expanded in-park offerings, and a strong consumer demand environment as factors influencing in-park per capita spending’s 22.7% rise since 2019.

• Operations cash flow totaled a record $229.7 million for the three-month period that ended on June 30. Free Cash Flow was a record $200 million for the same period.

In a keynote speech given in April at the IAAPA Expo 2021, then-Interim CEO Marc Swanson attributed the company’s ability to navigate the challenging 2020-2021 economic period to the collaborative efforts of its management team and Board, including Scott Ross, Founder and Managing Partner of Hill Path Capital and Chairman of the Board of Directors of SeaWorld Entertainment, Inc.

“Having a large investor on the Board allowed us to align goals and move even more confidently and decisively,” Swanson said. “That collaboration allowed us to address our operational costs and maximize our financial flexibility, giving us some breathing room to make difficult decisions with some degree of confidence.”

The company, according to Swanson, was able to quickly move to eliminate or defer non-essential expenses and substantially reduce or defer all capital spending by postponing most new rides from opening.

“Our partnership with our Chairman and our other Board members allowed our company to adjust and move forward with more creativity and nimbleness than we had before,” he said. “We were all in this together, and having our leadership team and board members in constant communication certainly allowed us to address this crisis head-on.”

In May, following the release of SeaWorld Entertainment, Inc.’s 2021 first-quarter earnings, SeaWorld’s Chairman of the Board of Directors, Scott Ross, noted the executive team played a key role in the organization’s performance, specifically mentioning Swanson and Chief Financial Officer and Treasurer Elizabeth Castro Gulacsy.

“Over the past year, Marc and Elizabeth, alongside the Board, have continued to execute the strategic initiatives we have been working on over the past several years and have taken the necessary decisive actions to position the company for long-term success,” Scott Ross said. “We look forward to their continued leadership as we work together to emerge a stronger and more efficient company and realize the full, long-term potential of this great company and its irreplaceable assets and brands.”

A number of industry analysts have also expressed optimism about the company’s future prospects—including a recent Zacks Investment Research analysis, which described SeaWorld Entertainment, Inc. as “coming out of the pandemic downturn with a vengeance” after having “proved its operational superiority in the amusement park space this past quarter, demonstrating record earnings that soared past estimates.”

According to the investment data and research provider, SeaWorld Entertainment, Inc.’s stock could be poised to increase in the coming quarters due to the company’s strong Q2 earnings report and the ongoing U.S. economic recovery; analysts’ 12- to 18-month price targets, Zacks says, have risen as high as $79 a share.

This article does not necessarily reflect the opinions of the editors or the management of EconoTimes