Closing Time for a Rock Theme Park

$400 Million Attraction in Myrtle Beach, S.C., Is Liquidating Just Nine Months After Opening

Closing Time for a Rock Theme Park

Hard Rock Park, a 140-acre theme park in Myrtle Beach, S.C., opened with great fanfare last April, hoping to lure tourists with a penchant for roller coasters and Led Zeppelin. Now, though, despite four years in development and two years in construction, the attraction is unplugging just nine months after opening.

Yesterday, a Delaware bankruptcy judge approved the company's request to begin liquidating what was billed as the world's first rock 'n' roll theme park and the single-largest tourism investment in South Carolina history.

Hard Rock Park's hard-knock life serves as one of the most colorful examples of lax corporate lending standards during the decade's lending boom. In the case of Hard Rock Park, private-equity investors put up about $75 million and raised another roughly $320 million in debt to fund their vision.

Despite excellent park reviews, customers didn't show. The park closed in September.

"Only in 2005 or 2006 could you raise this type of financing without some reasonable assurance that the business plan could work," said William Welnhofer, managing director and head of corporate restructuring at Robert W. Baird & Co., which wasn't involved in the park.

The park's marquee attraction was Led Zeppelin The Ride, a state-of-the-art corkscrew roller coaster developed in conjuction with members of the legendary foursome. Those preferring traditional wooden roller coasters could ride Eagles -- Life in the Fast Lane, inspired by the mellow rockers.

If parkgoers still had an appetite, they could sit down for a meal at Alice's Restaurant, a reference to the eatery in Arlo Guthrie's folk song where "you can get anything you want."

Despite excellent park reviews, customers didn't show. Since its opening in April 2008, the park has generated only $20 million in ticket sales, hardly enough to meet its roughly $24 million in annual interest payments, much less other operating expenses. The park closed in September.

"Overall attendance at the park was lower than expected," said the company in its original September bankruptcy filing, "primarily as a result of the macroeconomic conditions that significantly depressed overall demand in the travel and leisure industry." It employed 2,000 full-time and part-time employees.

Hard Rock Park was the creation of three Florida-based entertainment executives. Steven Goodwin, the CEO, helped develop the Hard Rock Hotel at Universal Studios Orlando; Felix Mussenden headed Universal Studios Orlando; and Jon Binkowski is a former executive at Sea World. A company lawyer said Mr. Goodwin wasn't available for comment.

The trio's plans coalesced around 2006, just as credit markets were reaching their peak. Having already spent four years planning the park, they were finally able to raise about $400 million in financing. That consisted of some $320 million in debt -- including about $100 million in junk bonds paying 12.5% -- as well as about $75 million in equity from investors, including New York's Safe Harbor Holding LLC.

Two bondholders who asked to remain nameless said they reasoned the park could piggyback off Myrtle Beach's popularity and good climate. Per-person spending was about $65, comparable to other theme parks, but it drew far fewer than the projected 30,000 people a day.

Hard Rock Park was built around a lake with a 70-foot replica of a Les Paul guitar.

One key to Hard Rock Park was its licensing agreement with Hard Rock International, the restaurant and casino chain, that authorized the use of its name for $1.5 million up front and at least $2.5 million annually.

In court filings, Hard Rock International said that the park has damaged its reputation and that its owners have failed to live up to their agreement. It has asked the bankruptcy judge to scuttle the licensing pact and to order the return of such memorabilia as a Madonna rhinestone suit valued at $15,884 and a Garth Brooks cowboy hat valued at $746.

Hard Rock Park said in its filings that frozen credit markets limited its ability to finance marketing campaigns. In September, after a disappointing summer season, the company entered Chapter 11 bankruptcy protection. It sought to restructure its strained balance sheet in time to reopen this spring, but it couldn't find new financing or a buyer. It is now liquidating

The liquidiation means an abrupt end to the park's unique rituals. At the end of every evening, Hard Rock Park closed down with Queen's "Bohemian Rhapsody" blaring over the speakers, accompanied by a laser and fireworks display.

"It's a real heartache," said Liz Gilland, the chairman of the local governing council where Hard Rock Park is located. "It wasn't one of those things that if you build it, they will come. They couldn't have opened at a worse time."

Original Story - Wall Street Journal