Premier Parks Sells Bonds to Finance Six Flags Deal
NEW YORK (Bloomberg) -- Premier Parks and Six Flags Entertainment have sold $700 million of bonds in three parts, with interest rates set at about the levels investors expected.
Oklahoma City-based Premier's bonds due in 2006 sold with a yield of 9.25 percent while a 10-year issue of zero coupon bonds sold at 10 percent. Six Flags' bonds due in 2006, which are guaranteed by Premier, sold at 8.875 percent.
Funds from the sale will be used to help finance Premier's $1.9 billion purchase of the Six Flags entertainment parks in Georgia and Texas and buy licensing rights to Bugs Bunny and other cartoon characters. The bonds carry junk ratings, though some investors said the companies are protected against some risks. "I like the deal," said Jerry Paul, who bought the bonds for Denver-based Invesco Funds. "It's got good coverage of the country. Some bad weather in one area doesn't break their back." Clark Stamper, who oversees $490 million of bonds at Stamper Capital and Investments in Monterey, Calif., said he likes the fact that the parks are easier to get to than the Disney resorts. "Unlike Disney, they're not destination resorts. They're more recession resistant." Jim Dannhauser, Premier Parks' chief financial officer, sold eight and 10-year bonds, rather than 30-year bonds, so the company can refinance its debt at lower rates later. "There's no question that our credit will continue to improve," he said, pointing to the company's aim to integrate its acquisitions and improve its operations. "We want to be able to take advantage of enhanced credit stature and reduced borrowing costs." The 9.25 percent yield for Premier's $250 million of eight-year notes was 359 basis points more than 10-year Treasury notes, and the $410 million of zero-coupon bonds due in ten years sold at a price of 61.391, or $613.91 per $1,000 bond, to yield 10 percent, about 434 basis points more than Treasuries. Investors' return on the zero- coupon bonds comes from the difference between the price paid and the bonds' value at maturity or sale. The 8.875 percent yield for $170 million of eight-year notes issued by Six Flags, and guaranteed by the Premier, was 321 basis points more than 10-year Treasury notes. …