Shapiro says Six Flags well positioned for economy, pushing debt for equity swap

Posted Thursday, April 23, 2009 10:57 AM | Contributed by Jeff

In an internal memo issued Friday, Shapiro said if the company was able to reach an accord with its bondholders, it would cut its debt and preferred equity obligations by about $1.2 billion and its annual interest and dividend requirements by $90 million. The clock is ticking though. Shapiro has set a June 25 deadline, and if he doesn't get it done Six Flags may have to hoist the white flag and file for bankruptcy protection.

Read more from The LA Times.

Thursday, April 23, 2009 11:14 AM

The parks are cleaned up and getting the highest guest satisfaction scores in our history. We said we wanted to increase the total revenue-spend-per-guest by 20% and we hit 21% after three years. We wanted 30% EBITDA [earnings before interest, taxes, depreciation and amortization] margins and we clocked in just above that this past year.We went from a company that loses $100 million in free cash flow a year to cash-flow positive. (Paraphrase: And all in just three years)

This statement right here is the reason why I would gladly buy Six Flags stock, in my opinion it is only a matter of time before the company turns around completely and starts climbing again. Provided they can avoid bankruptcy which, correct me if I am wrong, would mean losing the shares I bought. :(

Last edited by Morté615, Thursday, April 23, 2009 11:16 AM
Thursday, April 23, 2009 11:24 AM

You don't want to buy stock when they're about to dilute the value of it with this massive debt-equity swap, do you?

Thursday, April 23, 2009 4:30 PM

I don't really know, I don't follow the markets or own anything other than a few Disney and Cedar Fair shares that were given as gifts. But I would think that getting it while its only a few cents, and if it turns around that it would be a good idea. Again I don't know anything really about the stock market so I could be so far off that everyone is laughing at me now :)

Thursday, April 23, 2009 9:00 PM

If bankruptcy is declared you would be an unsecured creditor (if you own stock) so it would be up to a judge
to determine your payoff.To get out of bankruptcy the park
would probably issue new stock in some kind of swap
ie: 100 old shares for 10 new shares.
It looks likely they will bankrupt.
The person/company/people who will not talk about
equity swap are insured against the park filing bankruptcy.
So they will not deal unless cash is put on the table
and if they had the cash this would not be happening.

Friday, April 24, 2009 8:51 AM

I've always wondered this and this seems like a good place to pose the question:

If Six Flags files Chapter 11, which it seems it will inevitably do, what kind of impact will that have on the park? Will they be able to bounce back? Or are we looking at one of Six Flags' final seasons as we know it? I'm not too familiar with the way Chapter 11 works.

Also, if they file ch 11 during the season, will season passes still be good?

Last edited by Jeff Bachiochi, Friday, April 24, 2009 9:00 AM
Friday, April 24, 2009 11:57 AM

If they have cash on hand, and they're making more than they're spending, then there should be no visible impact on the operation of the parks in Chapter 11.

Friday, April 24, 2009 12:11 PM

The other article had indicated that should SF go to CH 11, the bankruptcy judge could limit the bonus contracts that have been agreed upon.

Just out of curiosity, can a judge limit any other expenditures as part of the bankruptcy agreement? Perhaps any that would impact operations?

Obviously, in Ch 11 everyone's goal is for the business to be successful so the agreement can be met, but strange things happen in the courts sometimes. Just wondering if the limitations are made at the judge's discretion or are they pretty well written into the law.

Friday, April 24, 2009 12:13 PM

Jeff Bachiochi said:
Also, if they file ch 11 during the season, will season passes still be good?

Even when the PARC-7F parks were sold off, the regular SF passes continued to be valid thru the end of the operating season. This situation is even less of a change, so I can't see ANY way that your '09 pass would be invalidated mid-season. That would virtually destroy any goodwill SF still has left with its customers... a virtually-nonexistent possibility.

Last edited by rollergator, Friday, April 24, 2009 12:13 PM
Friday, April 24, 2009 7:06 PM

Carrie M. said:
Just out of curiosity, can a judge limit any other expenditures as part of the bankruptcy agreement? Perhaps any that would impact operations?

The thing I wonder about would be future capital expenditures. If there is already an agreement in place, that should be honored. However I suspect future cap exs would need to be approved by the judge. For example, how do you justify buying a new $20 million coaster next year, when you currently are in bankruptcy protection from current creditors.

Friday, April 24, 2009 10:27 PM

Or whether a company would be willing to undertake a 20 million dollar project with no assurance how, when, or if they'll be paid.

Monday, April 27, 2009 9:04 AM

This whole situation makes me sad. I was a nay-sayer when Snyder and Shapiro took over, only from their lack of theme park experience, but they seem to have done something that no one else was able to do. So I agree with eveything, like $15 parking, no, but if it means you improve the parks infastructure and not just pocket the cash, then I am all for it. I wish the best for SF, and I have seen drastic improvements in the past three years, and each season seems to get better and better.


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