From 1998-2006 there were four large, well-funded competitors in the regional theme park industry. In order: Six Flags, Cedar Fair, Paramount Parks, and Busch Entertainment. Of these, Cedar Fair was regarded as having the best operating team.

In March 2004, Cedar Fair bought Six Flags Worlds of Adventure (the troubled park in Ohio that doomed Six Flags) for $145 million. Cedar Fair shut it down, presumably to remove a competitor to its flagship park (Cedar Point, only 70 miles away).

In June 2006, Cedar Fair bought Paramount Parks for $1.24 billion. Presumably, Cedar Fair overpaid because they thought they could run the parks better than Paramount and extract more profit from them. They quickly found out that this was a false assumption, and that Paramount actually had been an excellent operator. This made Cedar Point massively overleveraged heading into the recession.

The Beta of Cedar Fair in 2008 is 0.78, and the standard deviation of annual returns is about 25%. The market value of Cedar Fairs stock is approximately $690 million on December 31, 2008.

1) Determine a sustainable debt load for Cedar Fair as of the end of 2008.

2) How do these measures compare to the actual level of debt? Is the firm at risk of becoming insolvent? Pay special attention to the terms of the credit agreement

CEDAR FAIR, L.P CONSOLIDATED BALANCE SHEETS In thousands) 12/3108 ASSETS Current Asscts: Cash and cash equivalents Receivables Inventories Prepaids and other current assets $13,873 16,516 26,884 13,847 28.591 13.552 64.534 320,200 62,748 Property and Equipment: Land Buildings Rides and cquipment Construction in progress 344,688 317,811 582,654 1.270,852 3,997 1.295,076 28,110 2,532,747 2,550,002 (616.440 Less accumulated depreciation (707.656) Goodwill Other Intangibles, net Other Assets 1,825,091 222.602 54,078 19,778 1,933,562 325,418 66,098 0,842 2,186,083 2,418,668 LIABILITIES AND PARTNERS EQUITY Current Liabilitics: Current maturities of long-term debt Accounts payable Deferred revenue Accrued interest Accrued taxes Acerued salaries, wages and benefits Self-insurance reserves Other accrued liabilities 17,450 14,627 17,590 3,395 16.581 17,822 20,686 7,088 17,450 18,566 18,844 660 15.836 18,276 21,539 11,537 115,239 124,269 128,214 4.950 122.708 158.301 111,826 5,277 Deferred Tax Liability Derivative Liability Other Liabilities Long-Term Debt: Revolving credit loans Term debt 22,700 1,683,925 34,086 1,701.375 1 .706.625 1.735,461 Partnes Equity Special L.P. interests 5,290 5,290 Table of Contents 34 Form 10-K General partner Limited partners, 55,076 and 54.248 units outstanding at December 31, 2008 and December 31. 2007, respectively 242,123 (140,626 334,740 54,938) 285.092 $ 2.186,083 S 2.418,668 106.786 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements CEDAR FAIR, L.P CONSOLIDATED BALANCE SHEETS In thousands) 12/3108 ASSETS Current Asscts: Cash and cash equivalents Receivables Inventories Prepaids and other current assets $13,873 16,516 26,884 13,847 28.591 13.552 64.534 320,200 62,748 Property and Equipment: Land Buildings Rides and cquipment Construction in progress 344,688 317,811 582,654 1.270,852 3,997 1.295,076 28,110 2,532,747 2,550,002 (616.440 Less accumulated depreciation (707.656) Goodwill Other Intangibles, net Other Assets 1,825,091 222.602 54,078 19,778 1,933,562 325,418 66,098 0,842 2,186,083 2,418,668 LIABILITIES AND PARTNERS EQUITY Current Liabilitics: Current maturities of long-term debt Accounts payable Deferred revenue Accrued interest Accrued taxes Acerued salaries, wages and benefits Self-insurance reserves Other accrued liabilities 17,450 14,627 17,590 3,395 16.581 17,822 20,686 7,088 17,450 18,566 18,844 660 15.836 18,276 21,539 11,537 115,239 124,269 128,214 4.950 122.708 158.301 111,826 5,277 Deferred Tax Liability Derivative Liability Other Liabilities Long-Term Debt: Revolving credit loans Term debt 22,700 1,683,925 34,086 1,701.375 1 .706.625 1.735,461 Partnes Equity Special L.P. interests 5,290 5,290 Table of Contents 34 Form 10-K General partner Limited partners, 55,076 and 54.248 units outstanding at December 31, 2008 and December 31. 2007, respectively 242,123 (140,626 334,740 54,938) 285.092 $ 2.186,083 S 2.418,668 106.786 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements