Six Flags debt rallies, sources say bids made on parks

Posted Friday, October 20, 2006 10:40 AM | Contributed by Jason Hammond

Six Flags Inc. bond investors are gaining confidence in the company's plan to return to profit after eight years of losses. Bonds sold have returned 3.91 percent this month. Chairman Daniel Snyder plans to sell six of the company's 30 properties and use the money to reduce debt to $1.6 billion from $2.1 billion. He has received half a dozen bids, said a person familiar with the situation.

Read more from Bloomberg.

Friday, October 20, 2006 10:43 AM
WOW, So they sell parks, reduce the debt to 1.6 billion and in two years are back to 2.1.

Makes no sense, Pay it off.

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Friday, October 20, 2006 11:01 AM
Jeff's avatar Pay it off how?
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Friday, October 20, 2006 11:19 AM
Why would they be back to 2.1 bill if they sell these parks?

They are not spending foolishly like Burke did with ridiculous coaster additions.

While I think Shapiro is still a hypocrite for taking the raise that he did, I don't see them spending on capital that isn't going to improve the company.

If CF is having such a hard time with one park in GL and trying to make that right from the SF days, how do you expect Shapiro to to take that very company as a whole and turn it around in one season?

Patience is key here. Let them do their work for the next few years and see what happens.

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Friday, October 20, 2006 12:26 PM
rollergator's avatar Patience? That not part of the Wall Street lexicon... ;)
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Friday, October 20, 2006 12:55 PM
Lord Gonchar's avatar Makes me wonder if that's a magic number where the debt becomes 'managable' for the company. (or at least a whole lot closer) I think sometimes we work off the assumption that the debt has to be zero before things are 'fixed' financially. That's just not true.

We keep saying we expect the company to reduce itself to a core of a handful of parks running with little to no debt in the endles SF discussion threads, but what if while 2.1 billion is beyond SF's means, 1.6 billion is not?

Anything is possible, I suppose.

A half dozen bids? Interesting.

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Friday, October 20, 2006 1:00 PM
Jeff's avatar The magic number is whatever point that the payment on interest isn't making your cash flow suck, I would think. Debt is a normal part of life and business, but when you can't keep up with the interest, that's when you get into trouble.
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Friday, October 20, 2006 1:00 PM
Don't think that any of these investors are concerned about any of the properties being sold remaining parks either. They're looking to jump on the wagon to make money, and right now they're jumping on because of the anticipated sale of the six properties. Not because El Toro is somebody's #1 woodie or because Qbot rentals are up or because of more parades and characters walking around the park.

Six Flags can only go so far making money or reducing debt by selling property. It still has to show it can make a profit by both increasing admissions and in-park spending. So far it seems they can only do one at the expense of the other. The result is flat revenue. Flat revenue doesn't reduce debt a penny.

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Friday, October 20, 2006 1:04 PM
Lord Gonchar's avatar Yeah, that's kind of what I'm saying, Jeff. I suppose we don't know enough about the books to know what the magic number is, but in the gazillion discussions I've seen around here everyone seems to work on the assumption that the magic number is zero...and again, that's just not true.

Perhaps selling off this handful of parks and reducing the debt by a half-billion dollars is all they need to do to be financially stable?

I can hope, right? :)

*** This post was edited by Lord Gonchar 10/20/2006 1:04:59 PM ***

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Friday, October 20, 2006 2:06 PM
Wouldn't that be funny? 2.1 billion in debt not stable, but 1.6 billion stable.

I don't know, but anything over 1.55 billion sounds pretty bad. :)

-Tambo

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Friday, October 20, 2006 2:29 PM
The other thing to keep in mind is that if they knock off half a billion in debt, it makes it much easier to re-finance the remaining 1.6 still on the books at a much better rate. Imagine if you paid off 25% of your mortgage in one year, you would have the power to go in and re-finance say from a 30 year loan to a 15 year loan at a much better rate. Even though this is a different situation, the same basic rules apply.
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Friday, October 20, 2006 2:35 PM
rollergator's avatar I would think that the "magic number" is figured AS A PERCENT OF REVENUES....if the in-park spending increases, and attendance increases as well, (see RGB's post above, LOL), then the magic number can *theoretically* go higher due to increasing revenues...

Now...how do we get more money from the customers AND make them want to come back...with friends and family... :)

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Friday, October 20, 2006 2:43 PM
This caught my eye...

"Six Flags sent financial information to potential buyers in August. The six parks are in Los Angeles; Seattle; Denver; Houston; Concord, California; and Buffalo, New York. CEO Mark Shapiro said in June that he wanted to sell the parks within 24 months.

The parks the company plans to sell generate about $75 million in adjusted earnings, before interest, taxes, depreciation and amortization. "

I wonder what the plan is to make 75 million in adjusted earnings off the remaining parks? Could that be achieved? Also, good deal for whoever is going to take over those 6 parks. 75 million off those properties that could really use proper management, imagine what they would do if they were ran well! And......

"David Miller, an analyst with Sanders Morris Harris Inc., a Houston-based asset-management firm, said in a research report that if the company put a seventh property in Oklahoma up for sale, it would raise more than $750 million and meet its debt reduction target."

What exactly is in Oklahoma that could get 250 million?

``We haven't yet concluded that we are in fact selling the parks and we continue to explore our strategic options in this regard,'' Six Flags spokeswoman Wendy Goldberg said..

Interesting to say the least.

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Friday, October 20, 2006 2:55 PM
Lord Gonchar's avatar

What exactly is in Oklahoma that could get 250 million?

The old corporate HQ? ;)

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Friday, October 20, 2006 4:58 PM
john peck's avatar As a home-owner, my payment is $1,185 per month. After insurance, taxes and interest, Im lucky if $200 goes just to the principal.

I can't imagine $2.1 Billion.

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Saturday, October 21, 2006 2:15 PM
^^That along with Frontier city,if they havn't sold it already.
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Monday, October 23, 2006 10:20 AM
janfrederick's avatar ^^I want your payments! ;)
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Monday, October 23, 2006 11:30 AM
rollergator's avatar ^ Silly Californian.... :~P

Just to rub it in, my mortgage is less than half of jp's....oh, wait, my salary reflects my house payments....you all suck! ;)

Relatives from Jersey told me after PPP they're paying $1200/mo in just property takes....YIKES!

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