Six Flags files for Chapter 11

Posted Saturday, June 13, 2009 6:17 PM | Contributed by stevesteve8383

Six Flags Inc., one of the largest regional amusement-park companies, filed for bankruptcy protection Saturday. The company, shouldering more than $2 billion in debt, had been negotiating with lenders, selling parks and laying off staff in a race to restructure outside of bankruptcy court. But it couldn't outrun the deteriorating economy and a looming $288 million payment due preferred shareholders this August, along with $31 million in unpaid dividends. Six Flags hopes to exit bankruptcy quickly through a prearranged reorganization plan. It struck a deal with senior secured lenders that would allow it to convert $1.8 billion in debt to equity.

Read more from The New York Times and The Wall Street Journal.

Sunday, June 14, 2009 1:19 PM

Jeff said:
The only surprise I see is that it happened this early. I figured it would happen later in the summer, when they had stuff due, with the hopes that in the mean time they could get as many institutions as possible to fall in line and agree to an out-of-court settlement.

That would be the approach to take if you were really out to screw everybody. This is a pre-negotiated bankruptcy, which means that the debtholders (at least the largest one's) were already contacted, negotiated with, and everyone agreed to this. This allows for a QUICK trip through the bankruptcy courts, and a fast return to "normal". The bankruptcy process is expensive (lawyers, financial advisors,etc, and all of that gets paid out of current operations, by the debtor - Six Flags). Plus, the more people you stiff, and for larger amounts, the more likely one of them has enough "owed" to (and who's bitter enough) to get them into a position where they vote against the pre-packaged plan. The goal here is for Snyder and team to maintain their jobs. A normal bankruptcy process, with a potential for a competing bid(s) to buy the thing (in what's known as a 363 sale) would be a big risk for Snyder et al to take, and could have been a very REAL possibility.

Had they the opportunity to run up big bills this summer (and see next paragraph) and then stiff everyone, that would have been obvious to the Court and to the creditors. The creditors would not be very amenable to working on a plan at their expense, while Snyder obviously had planned to burn every bridge before it happens, AND allow current management to stay in their roles. The Creditors would have said, FU, let's put this thing up for sale and see if we can get more for our "amounts owed to us" than what SF is proposing.

I doubt many vendors were giving SF credit terms (meaning everything was COD, or pay up front) after this long of a downward spiral. Therefore, the vast majority of the dollars owed were strictly for debt, missed interest payments, and the PIERS units (including whatever interest or premium is involved with those instruments), and whatever older amounts were out there for plush, soda, food, etc. I would be stunned if current season stuff is being bought on credit terms.

So there really would be little that they could run up, besides utilities. Wages get paid every week (two weeks), and the first week you miss payroll, that's it.

Even a Pre-packaged bankruptcy allows them to use the bankruptcy laws to reject contracts, leases, etc that they want to. This includes SOME settlement agreements and other obligations (including perhaps any agreed to, but not yet paid, settlements for accidents, etc). Anything contract-wise not yet paid (short of some wages, taxes, and rents for continuing operations) is potentially subject to "rejection", which means hard cheese.

Waiting any longer wouldn't have achieved what Jeff mentioned in his comment, because (I would imagine) there is very little that they were buying on trade terms (ship me today and I'll pay you in 30 days). If there was a vendor who was working with them on credit terms, at this point, then they deserve what they get, as their Credit manager wasn't doing their job.

Last edited by CreditWh0re, Sunday, June 14, 2009 1:25 PM
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Sunday, June 14, 2009 1:31 PM

as an add-on to my rambling post above.

I'm pretty sure the reason they filed on a Saturday morning (before 8 am), was because payroll is on a Friday. Thus they paid all of their employees on Friday (the right thing to do) and then filed on Saturday. Thus there is a very limited pool of workers/people who might be impacted from a salary perspective (I won't bore everyone with the minutiae).

The whole thing here is for Snyder and team to say, "We didn't run up the totally unsalvageable debt, instead we've been improving operations to help create a viable (ex-debt) company and we're a serious management team".

Scorched Earth, or any type of funny business (like missing a payroll) contradicts that image, and more than likely means Snyder gets pushed out. That's the game plan for Snyder, to survive, so he's got to do this right.

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Sunday, June 14, 2009 5:04 PM

You keep bringing up Snyder, but really, aside from being chair of the board, what does he have to do with anything at this point? In the debt-equity swap, his 6% holding will get diluted to the point of having no significant shareholder voting authority, right?

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Sunday, June 14, 2009 10:04 PM

first of all, I dont see Synder getting hurt too much, other than his SF stock disappearing so to speak. He owns way too much, and has aquired wealth elsewhere, i.e. the Redskins, which is still the most profit-generating franchise in the NFL.

But in reference to what Jeff last said, regardless of his shares, doesn't he, as chairman of the board, have a lot to say/do with this process? Maybe I'm wrong, I dont pretend to know all about business. I DO agree with earlier comments, I am not surprised about the timing at all; I would venture to guess this was hurried BEFORE late season deals were made with vendors, and I would definitely agree that Six Flags was probably, prior to this bankruptcy, reduced to a non-credit operation. I cant imagine doing business with a company with their financial status and history, and doing it based purely on credit. However...such is the American way, sadly, which has a lot do with why our country is in the financial shape it's in...

Bottom line-the handwriting was on the wall on this one. If General Motors cant get away with it (and this is General Motors we're talking about, a staple in American industry and business), then surely Six Flags exec's saw this one coming. As I stated before, I am surprised it took this long, to be honest.

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Sunday, June 14, 2009 10:09 PM

Jeff said:
You keep bringing up Snyder, but really, aside from being chair of the board, what does he have to do with anything at this point? In the debt-equity swap, his 6% holding will get diluted to the point of having no significant shareholder voting authority, right?

But then, who is steering this insolvent hulk of a ship?

It sounds, from Snyder's PR spin, that they are already taking a page from Cedar Fair's playbook and paying for capex out of operating revenue. Probably because they can't do it any other way. And clearly Snyder understands that in this business the rule is "upgrade or die". So reinvestment is still important, even if the company is bankrupt. The customers don't care about the company's financial situation. But if they don't get what they want...shareholders be damned...they won't come back, won't spend, and the turnaround plan will fail. Six Flags and its creditors all know this. That's why they are doing it the way they are doing it.

I still think this hardly qualifies as "news" given that everyone saw it coming months ago... :)

--Dave Althoff, Jr.

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Sunday, June 14, 2009 10:12 PM

couldn't agree more, Dave

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Sunday, June 14, 2009 10:44 PM

I guess I thought Shapiro was mostly steering the organization through this process. I'm sure he's not doing it in a vacuum and Snyder is providing consent, but its Shapiro and his other executives who stand to gain success bonuses should they navigate the organization through this process and out the other side successfully.

And while I agree that this isn't a shock to anyone, I do think its now that things will get interesting.

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Sunday, June 14, 2009 11:19 PM

Now the big question is...will this effect attendance?

It was on the 5pm news here in detroit. Now I bet the average person(teens and young adults) think that six flags is closed.

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Monday, June 15, 2009 12:49 AM

I saw it on Google News and a few other news sites yesterday. I bet it's a pretty big national story, or Google just somehow knows what I want to see. :)

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Monday, June 15, 2009 2:15 PM

CreditWh0re said:

Captain Hawkeye said:
I don't know--if New Orleans wins their suit they become stockholders in SF. Whereas Synder et al cease to be.


Are you sure about that Cap'n? This is a pre-pack, so that usually means that Management stays on. Obviously the largest secured lender was behind(Supportive) this, and it should meet no real objections.

Therefore, as I see it, Snyder stays. Or were you referring to any ownership status he had (which I have to admit I don't remember)

I was refering to Snyder et al (the owners) not Shapiro (management).

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Monday, June 15, 2009 2:19 PM

as I mentioned in the other thread, I obviously had my "S"'s wrong. I was thinking of Shapiro, but I typed Snyder.


yes Snyder's investment is diluted, similarly to all the other Bond, Piers, and common shareholders.

Since the contracts in question are most likely to be rejected during the bankruptcy process, thus negating any prior obligations, NO is essentially SOL. There is no chance of them becoming a shareholder in the NEW Post Bankruptcy SF.

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