Great Wolf Resorts using cash to manage balance sheet leverage

By Jennifer Lanning Drey

Savannah, Ga., Nov. 3 - Great Wolf Resorts, Inc. will continue to use its cash primarily to manage balance sheet leverage as the company pursues a capital-light growth strategy, Jim Calder, Great Wolf's chief financial officer, said Wednesday during its third-quarter earnings conference call.

The company is already actively working to refinance its next significant maturity, which is the mortgage loan on its Concord, N.C., property. The loan matures in April 2012, he said.

Great Wolf currently expects that loan to be refinanced in the $60 million to $65 million range, which means the loan will require some pay-down from its $78 million balance, he said.

"We have planned for this pay-down in our forecasts, and given our current strong cash and liquidity positions, we do not foresee an issue with making that pay-down," Calder said.

Great Wolf had spent $8 million on capital expenditures through Sept. 30 and expects full-year capital expenditures to be about $9 million, he said.

The company had $43.1 million of cash and cash equivalents and $553.0 million in total debt at Sept. 30, according to its earnings release.

Growth in slow economy

For the third quarter, Great Wolf reported adjusted EBITDA of $25.7 million, which was up from adjusted EBITDA of $24.8 million in the third quarter of 2009.

Total revenues increased to $81.1 million in the third quarter, compared with revenues of $76.8 million for the same period of 2009.

During the period, same-store total revenue per occupied room increased by 2.2%, while the same-store average daily rate also increased by 2.2%.

"We are pleased that we were able to deliver steady growth, even in a slow economy," Kim Schaefer, Great Wolf's chief executive officer, said during the call.

The third quarter is a seasonally strong period for the company because it includes the busy leisure months of July and August, she said.

Loan transfer

Also during Wednesday's call, Calder noted that subsequent to the end of the third quarter, the non-recourse loan secured by Great Wolf's Traverse City, Mich., and Kansas City, Kan., resorts was transferred to the loan's special servicer at the company's request.

Great Wolf did so in order to open dialogue with the special servicer responsible for the CMBS loan, Calder said.

The resorts are still producing positive EBITDA, and the loan is not in payment default. However, the resorts have failed to meet a required minimum debt service coverage ratio.

Due to current economic conditions, Great Wolf believes the value of the two properties is now significantly less than the $67 million principal of the loan.

Great Wolf is working with the special servicer to discuss a potential modification to the loan and will provide updates on the situation as warranted, Calder said.

Great Wolf is a Madison, Wis., operator of indoor waterpark resorts.

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