I think we all need to wait and see what exactly happens with this bankruptcy before we act like we really know what's in SF's future. It's clear what the management is trying to do with this, and where their intentions are for the future.
That said, this debt needs to be dealt with, and I think we can all hope that this finally solves the debt problem. If the debt problem is eliminated once and for all, based on what's happened in the past 3 or so years leading up to today, I think you'll see a rather successful Six Flags in the years to come.
That can be taken care of in 5 years or less. Considering last year was their best year yet with making 275 million. That 600 million will go bye-bye pretty quick. Considering how many more people are going to Six Flags due to lower prices. SFGAM has more people this year that it did at the same time last year. I am sure it is like that at other SF parks.
This stock is going to be discontinued. The lenders are getting the ownership, sell whatever you guys have now before you lose EVERYTHING
Off to try to sell my -B for a nice loss
^ They didn't *actually* make that much, as Joey has pointed out over and over. They keep pushing that number saying "hey this is what we WOULD have made had we not had to pay interest, taking depreciation hits etc etc. They still had a $100M net loss last year
(I'll be honest, I didn't realize how bad they were fudging the numbers till I looked at the reports)
BTW, just to put in perspective why I think all this talk about how the company is suddenly in much better shape now that it's in chapter 11 and under new management might be overblown...
I happened to come across THIS article when looking up info on Six Flags and EBITDA.
For example, look at Premier Parks, which operates the Six Flags chain of amusement parks. Premier touts its Ebitda performance, but that masks a big part of how the company operates--and spends its money. Premier argues that depreciation for big-ticket items like roller coasters should be ignored because rides have a long life. Critics, however, say that the amusement industry has to spend as much as 50% of its Ebitda just to keep its rides and attractions current. Those expenses are not optional--let the rides get a little rusty, and ticket sales start to trail off. That means depreciation associated with the costs of maintaining rides (or buying new ones) should really be viewed as an everyday expense. It also means investors in those companies should have strong stomachs. Premier's CFO did not respond to requests for comment.
So it looks like the new management is taking a page right out of the old managements playbook....
^That's a great article and I appreciate your hard nosed approach to explaining what's going on with Six Flags. The article explains a lot of the problems with not only companies like Premier, but with much of the US economy as a whole. A good number of people that work for these companies know what's going on, but they use the law to their advantage by using terms like EBITDA to appear as if they're rich. What it comes down to is you gotta know your facts, and based on how things have been occurring lately, its seems like a lot of people these days don't.
GAAP is the Generally Accepted Accounting Principles, and it explains why the company that runs Six Flags has been digging itself into a hole for years.
Coasters are basically so much of an investment that most parks never pay them off right away, and when you account for daily maintenance on a coaster that you're paying off with interest, the profit margin from the coaster isn'tthat large. When parks aren't profitable, the bills for the coasters keep coming, and quickly they're owing for a coaster they can continue to run to bring in guests, but are annually (or monthly) falling behind on financially.
Six Flags is improving - internally - by trying to change its lackluster image through its employees. They bring in large amounts of guests yearly, and if they keep it up the numbers will keep rising. The hardest part of running a company is getting it over that "ghetto" hump to the "luxury" hump, because once you're sailing smooth in the the theme park industry, it gets easier to make more money. Walt Disney proved it.
Except EBITDA has been used by many companies for decades. There's nothing illegitimate about its use as long as the numbers are not being manipulated. How use of EBITDA is proof of anything shoddy is a real stretch IMO, especially when you're only touting simply its use, not its misuse, or shenanigans involved in its calculation, as some form of proof of false advertising.
So EBITDA is not a GAAP method. So what? This letter isn't part of Six Flags' Annual Report, and it's not part of their official financial statements. They've never once stated that $275M was their net profit. Shapiro claimed they made $275M, and that's a factual statement of the amount of earnings (the "E" of EBITDA) before the ITDA part of EBITDA.
If you had some case for manipulation of numbers, that'd be one thing, but a simple use of EBITDA is proof of zero, especially with every indicator being that SFMM, at least, is well on its way to a significant turnaround.
That's the biggest difference between that letter, and how Premier used to use EBITDA. Premier was in total denial, while Shapiro is presenting the case that the turnaround is real, and the progress is real. You can complain about EBITDA and continue to hate on Six Flags all you want, but you can not tell me that SF hasn't made huge strides forward, and is continuing to.
Here is an article on how they plan to get out of bankruptcy, and if it works out, it should hopefully help the company a lot. At the same time, I'm concerned as they are taking out a new $600 million loan, but I hope it works out in the end.
June 15 (Bloomberg) -- Six Flags Inc., the owner of 20 theme parks that hasn’t posted an annual profit since 1998, is seeking a $750 million credit facility as part of a reorganization plan under bankruptcy protection.
The new capital structure would include a $600 million term loan and a $150 million revolving credit line, as well as new common stock and options, the New York-based company said today in a regulatory filing.
Six Flags filed a Chapter 11 petition in U.S. Bankruptcy Court in Wilmington, Delaware, on June 13, listing assets of $3 billion and debt of $2.4 billion as of Dec. 31. The company said today it plans to use cash collateral from lenders led by JPMorgan Chase & Co to finance operations while it seeks court approval for a prearranged reorganization plan to cut its debt by about $1.8 billion and eliminate more than $300 million of preferred stock obligations. The reorganization plan has yet to be filed with the court.
“This proposed reorganization plan is likely to be met with resistance by the unsecured lenders,” CreditSights Inc. analysts Chris Snow and Frank Lee wrote in a report today, citing an equity offer of 10 percent in the reorganized company. That compares with an 85 percent stake bondholders were previously offered for a debt-for-equity exchange, the analysts wrote.
The new term loans would have an interest rate seven percentage points more than the London interbank offered rate, with a 2.5 percent floor, according to the filing. Six Flags said the five-year credit line would be backed by “substantially all assets.” The company would have the option of buying back the loans at 103 cents on the dollar in their first year, 101.5 cents in the second year and on par thereafter.
Six Flags didn’t disclose financing costs for the four-year revolver, which also would be secured by its assets.
As part of its Chapter 11 financing, Six Flags is seeking to renew or extend the maturities of existing letters of credit, subject to lender approval, and to get a so-called debtor-in- possession letter of credit facility to finance requirements.
“This action to clean up the balance sheet paves the way for a full revival of the company,” Chief Executive Officer Mark Shapiro said in a June 13 statement. “This process is strictly a financial restructuring of our debt.”
In other news, the bankruptcy won't affect Six Flags Dubai.
DUBAI, June 15 (Reuters) - Tatweer, a leisure developer owned by Dubai's ruler, said on Monday the bankruptcy of its partner Six Flags (SIXF.OB), one of the world's largest theme park operators, will not delay a multi-billion dirham project.
New York-based Six Flags, which operates or owns 20 parks in North America, said on Saturday it filed for Chapter 11 bankruptcy protection as it struggled with a $2.4 billion debt burden and faced a looming cash payment of $300 million.
"The chapter 11 announcement from Six Flags has no impact on our theme park plans or their openings," Tatweer said in an e-mailed reply to Reuters questions.
"We have nothing to add and will not make any announcement regarding our development plans in the context of Six Flag's financial restructuring."
The Dubai firm did not make clear if Six Flags would still be involved in its project.
Tatweer, which is building at least seven theme parks in the Gulf Arab emirate, signed in May last year an agreement with Six Flags to develop a theme park in Dubai and develop other projects in the Arab region.
The first phase of the Dubai park was projected to be ready in 2011, Tatweer said last May. The park will stretch over five-million square feet, will feature 30 rides and will welcome as many as 3 million visitors a year.
Hundreds of billions of dollars of property and construction projects have been cancelled in Dubai and firms have laid off thousands of employees as the financial crisis hits the United Arab Emirate's trade and tourism hub.
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