Merlin Entertainments Ltd, the company behind Legoland, Madame Tussauds, and Sea Life, recently secured new funding totaling £657 million ($890 million) to address upcoming debt deadlines. This development comes after the company's junk bonds had slid to distressed levels following an underlying loss in the first quarter, fueled by high costs, interest payments, and the geopolitical fallout from the Iran war.
Despite this new financing, Merlin Entertainments, backed by Blackstone Inc., still faces significant financial challenges. The company has approximately $4 billion in total debt and has been exploring various proposals from creditors to manage its liabilities and improve liquidity. Its senior unsecured notes due in November 2027 have been trading at lower prices, with the 7.375% notes recently trading at 77 cents, indicating market concern over its weakening financial performance.
Merlin's financial woes stem partly from its 2019 leveraged buyout by a consortium including Blackstone, the Canadian Pension Plan Investment Board, and Kirkbi A/S. This acquisition loaded roughly $3 billion of new debt onto Merlin's balance sheet, increasing its leverage significantly. Analysts note that while the company's operational performance is sound, with record revenues of approximately $2.1 billion in 2023, its balance sheet remains heavily burdened. S&P Global downgraded Merlin in 2025, labeling its capital structure as "unsustainable" with an adjusted leverage of about 11.8x and an annual interest and lease bill exceeding $360 million.
Adding to the pressure, rising interest rates since 2022 have made debt servicing more expensive. Earlier debt issues carried interest rates around 5.75%, while newer issuances, such as the $410 million in February 2025, were priced at 8.375%. While the sale of its LEGO Discovery Centres for £221 million ($270 million) provided some liquidity, it was not considered transformative enough to fundamentally alter its debt situation, leaving investors with lingering doubts about its long-term financial stability.
