Apex Parks Group LLC

April 8, 2020

California-based TZEW Holdco LLC and six affiliates (including Apex Parks Group LLC, the “debtors”) filed for bankruptcy in the District of Delaware. The debtors are Carlyle-owned family entertainment centers located in California, Florida and New Jersey. Here’s what the debtors’ website says about their business prospects:

According to a 2011 International Association of Amusement Parks survey, 25% of Americans surveyed visited an amusement park within the last 12 months, with 43 percent of Americans indicating they plan to visit in the next 12 months. Consumers have a desire to get out of the house for fun, but want their entertainment dollars to represent a good value for the entire family. In America, people visit amusement parks nearly 300 million times each year and generate more than $12 billion in revenue.

Eesh. That’s a tough read these days. 😬😷

The purpose of the filing is to eliminate debt and sell the business to their pre-petition secured lenders. Troubles have been brewing here since 2019: indeed, the debtors have been “perpetually distressed.” Per the debtors:

The Company suffered from a number of challenges leading to these chapter 11 cases, including, among others, increased industry competition and consolidation, heavy operational expenditure requirements, the seasonal nature of the business, general litigation, and irregular management turnover. In the years and months leading up to the Petition Date, the Company initiated multiple go-forward operational initiatives to increase profitability, such as implementing strategic pricing and season pass sales, redesigning food and beverage offerings, optimizing operating calendars, and generally investing in the maintenance and improvement of its locations. Despite these efforts, the Company continued to experience negative cash flows and, ultimately, an unsustainable balance sheet. In the months leading up to the Petition Date, the Company faced rapidly dwindling liquidity and, in order to maintain day-to-day operations, needed to increasingly rely on discretionary disbursements under its prepetition financing agreement.

The Disney Effect!!

Indeed, the debtors blame Disney Inc. ($DIS) and Six Flags Entertainment Corporation ($SIX) for being bigger, better, and deep-pocketed. Well, and having much better IP. Anyone looking for a bullish reason to buy DIS stock — assuming COVID-19 is a short-term issue — can see here, in the words of a competitor, why DIS’ IP strategy over the years has been solid. Per the debtors:

For example, estimates suggest that Universal Studio Orlando's first Harry Potter attraction boosted attendance by 50% over the attraction's first three years. Similarly, Disney has recently constructed Star Wars themed attractions at Walt Disney World it Orlando, Florida and Disneyland in Anaheim, California, as part of a $2 billion investment Disney has made in its theme parks. This industry competition and consolidation by major corporations in recent years has been a key driver in a string of closures of small and middle market theme parks across the country.

The debtors were in the midst of parallel-tracking their marketing process while also talking to their lenders about additional sources of liquidity. COVID-19 didn’t help matters. The debtors shut down their parks and now that people are Amazon Priming their cotton candy, the revenue spigot is off.

As you well know, interest payments are, absent waivers/forbearance from lenders, still due. The debtors owe $79mm to lender, Cerberus Business Finance LLC. An affiliate thereof will serve as stalking horse purchaser of the debtors’ assets with an eye towards the EBITDA-rich June-September period — assuming people are allowed out and are willing to go to amusement parks by then. Cerberus is also providing the DIP. In other words, Cerberus is driving the bus here. The DIP commitment requires a sale hearing no later than May 11, 2020.

• Jurisdiction: D. of Delaware (Judge Sontchi)

• Capital Structure: $79mm (Cerberus Business Finance LLC)

• Professionals:

  • Legal: Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, David Bertenthal, Timothy Cairns)

  • Independent Directors: Michael Short, Jeffrey Dane

  • Financial Advisor: Paladin Management Group LLC (Scott Avila, Jennifer Mercer)

  • Investment Banker: Imperial Capital

  • Claims Agent: KCC (*click on the link above for free docket access)

• Other Parties in Interest:

  • Administrative Agent: Cerberus Business Finance LLC

    • Legal: KTBS Law LLP (Michael Tuchin, David Fidler, Jonathan Weiss, Sasha Gurvitz) & Young Conaway Stargatt & Taylor LLP (Michael Nestor, Robert Poppitti Jr.)

  • Stalking Horse Purchaser: APX Acquisition Company LLC

  • Largest Equityholders: Benefit Street Partners & Edgewater Growth Capital Partners