Pandemic challenges Legoland parent

H&LA’s David Sangree got the opportunity to weigh in for an article in the Times Herald-Record on the challenges for Legoland’s owner Merlin Entertainment in the wake of the COVID-19 pandemic that is challenging leisure attractions worldwide.

Legoland New York’s parent company is in survival mode, recently completing a $543 million high-interest bond sale to sustain it while the coronavirus pandemic closes its attractions.

The junk bond sales’ timing couldn’t be worse for Legoland’s United Kingdom-based owner, Merlin Entertainments, which in March delayed till 2021 its July 4 scheduled opening for a $500 million Goshen Legoland. (Work on a new state Route 17 Exit 125 beside the park, set to be the largest of nine Legolands worldwide, continues).

Merlin was already deep in high-interest debt, following a roughly $7.5 billion leveraged buyout, led last June by U.S. private equity giant Blackstone, the Canada Pension Plan Investment Board and an entity owned by KIRKBI Invest A/S, investment vehicle for Danish family that invented Lego bricks.

The parties took Merlin private, with debt moves that analysts widely characterized as loose and aggressive, including a $2.81 billion loan and a subsequent $821 million bond issuance.

S&P Global Ratings and Moody’s each rate Merlin well below investment-grade. And Moody’s recently assigned a B1 (junk-grade) rating to Merlin’s latest bond sale, which subordinated October’s bond buyers for repayment.

Merlin, the second-largest operator of visitor attractions behind Disney, recently told investors just nine of Merlin’s 130 venues, including Madame Tussauds wax museums and other attractions, are open.

“We have a strong 20-year track record as a highly cash generative company with supportive owners,” Merlin spokeswoman Julie Estrada said in a statement on Monday. “We have put in place a number of immediate measures to reduce costs where attractions are currently closed, and are engaging with governments to utilize the support packages being put in place across the markets where we operate.”

Even losing 90 percent of its business through July, Merlin’s liquidity is adequate in the short-term, according to Moody’s.

Merlin’s future is another question. Disney Shanghai reopened, Monday, at less than one-third capacity, said Dennis Speigel, CEO of Cincinnati-based International Theme Park Services, an analysis firm.

Merlin “will make it,” though it faces an unprofitable year if parks don’t open in early July, said Speigel, adding the company is burning through about 30 million pounds ($36.9 million) per month.

In other news, Monday, the state Department of Environmental Conservation confirmed it’s negotiating a third consent order with Legoland to force the company to stop polluting mid-Hudson waterways with construction runoff.