Six Flags Done In By Debt

Six Flags Files for Bankruptcy
June 13, 2009, 11:26 am

Six Flags, the big theme park operator, filed for bankruptcy in early Saturday morning in Delaware after failing to reach an agreement with lenders over a plan to reorganize its debt outside of court.

Six Flags became only the latest company to prove unable to cope with its debt load at a time when previous solutions like refinancings are largely unavailable. The theme park operator, which had $2.4 billion in debt, faced nearly $300 million in payments to preferred stockholders due in August.

But the company is hoping to make its ride through bankruptcy a short one. In a statement, Six Flags said that it is seeking court approval for a pre-negotiated restructuring plan, one that has the unanimous approval of its lenders. That proposal would eliminate $1.8 billion in debt and slice off the $300 million in preferred stock payments.

“The current management team inherited a $2.4 billion debt load that cannot be sustained, particularly in these challenging financial markets,” Mark Shapiro, Six Flags’s chief executive, said in a statement. “As a result, we are cleaning up the past and positioning the Company for future growth.”

In its bankruptcy filing, Six Flags said that 37 of its subsidiaries, including parks like Great Adventure and Hurricane Harbor, had also sought court protection. The parks will continue to operate normally, but analysts have questioned whether attendance would fall off as some consumers shun waiting in line for roller coasters at a bankrupt theme park operator.

The filing is a blow to Dan Snyder, the owner of the Washington Redskins, who took control of Six Flags in 2005 after waging a proxy fight and holds about a 6 percent stake in the company. Mr. Snyder sought to turn around the company, installing a new management team led by Mr. Shapiro, and selling off underperforming parks.

He sought to clean up the remaining parks by banning smoking, increasing security and having more costumed characters like Tweety to roam around.

Other major investors in Six Flags include Bill Gates’s Cascade Investment, which held an 11.1 percent stake, and the hedge fund Renaissance Technologies, with a 5.5 percent stake.

Six Flags said in its statement that the filing comes despite a good 2008, in which the company cut its net loss to $135 million from $275 million a year ago. Its net loss for the first three months of 2009 narrowed nearly 7 percent from the same time in 2008, to $146.3 million.

But the company saw a 24 percent drop in revenue over the same period, as it suffered from lower attendance and spending at its parks.

Because the credit markets remain largely frozen for troubled companies, Six Flags was unable to refinance its massive debt load. The moribund real estate market also precluded the company from selling off property, like unused land in Maryland and New Jersey, to raise additional cash.

Six Flags’s primary advisers are the investment bank Houlihan Lokey Howard & Zukin and the law firm Paul Hastings Janofsky and Walker.

– Michael J. de la Merced