08 May 2019
Zhonghong loan default will not affect SeaWorld finances, says Antorcha
BY Tom Anstey
SeaWorld CEO Gus Antorcha has revealed more details about its failed China projects, after its majority shareholder, Zhonghong Group, defaulted on outstanding loan payments forcing the operator to terminate exclusivity agreements with the property developer.
When Zhonghong acquired a 21 per cent stake in SeaWorld from Blackstone in 2017, two agreements were then put in place: one for Park Exclusivity and Concept Design (ECDA); the second for Center Concept and Preliminary Design (CDSA). Under the terms of these agreements, SeaWorld would have provided guidance, input and expertise relating to strategic planning, concept and preliminary design of Zhonghong's family entertainment centres.
Speaking during an earnings call, Antorcha said that when Zhonghong acquired its stake in SeaWorld, part of that acquisition included shares of common stock which secured its loan obligations. When Zhonghong defaulted on its loan, the lenders took ownership of those shares.
"These matters are primarily between Zhonghong and its lenders, and we do not expect these matters to have a material effect on our business, financial position or results of operations," said Antorcha.
"In connection with these events, Yongli Wang, one of Zhonghong's representatives on our Board, has resigned from our Board. We have asked Yoshi Maruyama to remain as board chair given his experience and skill set."
SeaWorld recorded revenue of US$5.1m (€4.55m, £3.92m) in 2018 through the agreements, with US$1.5m (€1.34m, £1.15m) being received on its balance sheet by the end of 2018. In addition, around US$1.7m (€1.52m, £1.31m) is expected to be recouped, relating to "non-refundable amounts which were received from Zhonghong prior to the termination under the terms of the Zhonghong agreements".
In its Q1 earnings report, SeaWorld increased revenues by US$3.4m (€3m, £2.6m) to US$220.6m (€196.8m, £169.5m). For the quarter, the company made a net loss of US$37m (€33m, £28.4m), significantly cutting a US$62.8m (€56m, £48.2m) loss for the same period in 2018. Adjusted EBITDA was US$16.4m (€14.6m, £12.6m), an improvement of US$14.1m (€12.6m, £10.8m), over the first quarter of 2018.
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