Six Flags Inc. on Monday began defending its proposed Chapter 11 reorganization plan, which would give holders of senior secured notes issued by its operating subsidiary more than 90 percent of the equity in the new company. Holders of junior notes issued by Six Flags Inc. would receive only about 5 percent of new equity under the plan and have proposed an alternative that provides full cash recovery to other creditors and leaves themselves in control of Six Flags. Six Flags, which owns about 20 amusement parks across the U.S., Mexico and Canada, sought bankruptcy protection in June 2009, burdened by high debt and declining park attendance by economically strapped consumers.
After months of discussions with debt holders and secured lenders, Six Flags dumped its initial reorganization proposal. It called for a debt-to-equity swap giving secured lenders 92 percent of the reorganized company's common stock and allowed bonuses for top executives of up to $30 million upon emergence from bankruptcy.
In its latest revision, the reorganization plan calls for $830 million in debt financing and a $450 million equity offering. Lenders would be paid in full, and holders of senior notes issued by Six Flags Operations Inc. would receive about 25 percent of the reorganized company's common stock, with rights to purchase an additional 70 percent.
Holders of SFI's junior notes remain opposed to the plan. Last week, they announced a financing commitment of more than $1 billion from Goldman Sachs and UBS for their alternative proposal. Their plan includes $1.1 billion in new debt and a $582 million rights offering, proceeds of which would be used to pay the SFO noteholders, led by Avenue Capital Group, in cash instead of stock.
A key issue surrounding the competing reorganization plans are the enterprise values they put on Six Flags. Experts for Six Flags and the SFO noteholders peg the midpoint of the valuation range at about $1.5 billion. Experts for the SFI noteholders and Six Flags' committee of unsecured creditors put the midpoint at close to $2 billion. Under the valuations of Six Flags and the SFO noteholders, the company's reorganization plan would result in those noteholders being paid less than the full value of their claims. Opponents of the plan argue that, because it is undervalued, the SFO noteholders will receive far more than the value of their claims.
Six Flags' chief financial officer, Jeffrey Speed, the first witness called in a scheduled two-week trial, testified Monday that further delays in emerging from bankruptcy could have a significant negative impact on the company, which depends heavily on the summer vacation season for much of its theme park revenue. "We believe the bankruptcy taint has not been good for business," Speed said under cross-examination by Christopher Shore, an attorney for the SFI noteholders. Speed noted that Six Flags conducts 80 percent of its theme park business is the second and third quarters, mostly in the June-August summer period. While a handful of parks opened last weekend, Speed said cash typically remains tight until the summer season kicks off on Memorial Day.
A delay in emerging from bankruptcy could affect sponsorship deals, group visits, and season pass sales, said Speed, who noted that, since the bankruptcy filing, Six Flags has seen a fivefold increase in calls from potential patrons, wondering whether its parks are open and safe.
Change the scheme, Alter the mood! Electrify the boys and girls if you would be so kind!
* According to this article, there were numerous investors that were interested in the company. One of them struck my eye like a lighting bolt. (Apollo Management) was one of the companies that were interested in Six Flags. They also own the Cedar Fair properties.
WILMINGTON, Del. (Dow Jones)--Creditors of Six Flags Inc. (SIXFQ) have found signs that life after bankruptcy for the troubled amusement park operation could include a combination with rival Cedar Fair LP (FUN).
Avenue Capital Management, the investment fund leading a drive to take over Six Flags in Chapter 11, sent representatives to Cedar Fair last fall, said Andrew Dash, attorney for the official committee representing Six Flags' committee of unsecured creditors. He's with Brown Rudnick.
"This economy is so bad, even the drug dealers are lookin' for second jobs!" -anonymous dealer. Westside Cleveland.
^I'd guess Great America, although both parks have their problems with a lack of space available, height restrictions, and neighbor troubles.
This could be very interesting, and if this does happen, I'd like to see what happens with licensing and season passes. Do they keep Warner Bros, Snoopy, both, or do they not have any? Also, do they keep Six Flag's season pass policy(hopefully) or Cedar Fair's? As long as they keep Six Flags season pass policy and Kinzel doesn't run the parks, I'll probably be happy. Definitely going to have to pay attention to this to see how it turns out.
V True, I just liked how cheap Six Flags pass is/was, but I'll still buy a pass with Cedar Fair's pricing structure.
This should be interesting to follow. I wonder if a chain of that size would start to run into any anti-trust issues. My hunch is that it would not be a problem, however I'm guessing some smaller parks would scream foul.
Now for the more business centric people out there I have a question that caught my eye. Why would anybody give credit to Six Flags and not take the steps to secure it? I understand the purpose of secure filings (as well as a disgusting amount of technical details behind them) however the concept of why creditors wouldn't file the paperwork remains beyond me.
larrygator wrote:^if they want to be a viable company long into the future they adopt the Cedar Fair season Pass pricing policy.
A company can not make money with the Six Flags season pass pricing structure, sorry if that prohibits all the cheapos from bying a pass, but that's reality.
I agree. I like how Cedar Fair does things. And If they merge I think the current Six Flags management will be booted out and Cedar Fair will now run the show, which is what I'm hoping for. I always thought that Cedar ran better parks than Six Flags Inc. As for Warner staying, I could care less. The company did not really use Warner Bros to their highest ability. There are so many movies that they could have used to make rides. Not only that but D.C. Comics is very hard to get licensing agreements from. Cedar would bring newer elements to the park. Fright Fest would also be a lot better. Just look at what they did for Kings Dominion. They had at least eight haunted houses and they were all free. Good quality for for season events are what a lot of the parks need. Being family friendly is good, but the parks still need go thrills, chills, and spills if they want to improve.
I could also see a lot of the smaller parks improving under Cedar Fair's management. Advertisements, maintenance, friendly park staff, and better operation hours are what I am looking for under a Cedar Fair management.
Any thoughts on which Six Flags parks may be sold under Cedar Fair and which parks will be improved?
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