Six Flags offers sale proceeds to lenders, intends to use remainder to reduce debt

Posted | Contributed by Jeff

Six Flags, Inc. announced that following the successful conclusion of the sale of seven of its parks on April 6, 2007, it has completed the offering of net cash proceeds from the asset sale to its Tranche B Term Loan lenders, as required under the terms of its credit agreement. The Tranche B Lenders had the option to accept or reject any of the net cash proceeds offered to them.

At the time of the April 16 deadline, only .47% of the Tranche B Term Loan lenders had accepted payment. Therefore, under the terms of the credit agreement, the net cash proceeds rejected by the Tranche B Term Lenders -- approximately $268 million -- can now be used by the Company for purposes including: repaying its revolver; repurchasing its bonds; for capital expenditures; for obligations under the partnership park agreements; and for other corporate uses. The Company intends to use these net cash proceeds to further reduce its debt.

Read the press release from PR Newswire.

This is good news...how about using some of the money to hire employees who want to actually work and are customer service oriented.

Unfortunately what this release actually says is they are going to use the vast majority of the NET sales proceeds to pay down the off season revolving line of credit debt NOT the more onerous two and a half billion dollars of LONG term debt which includes the PIERS . This actually has them moving backwards in their goal of deleveraging by increasing on a relative basis the amount of cash flow needed to pay interest on the debt .Coupling the sale of the seven parks with the reduction of thirty million dollars of EBITDA and with higher interest rates they accepted in the bank covenant renegotiations they are taking on much more debt to cash flow coverages . Throw in much higher overheads ( especially the much larger corporate overhead ) and you are looking at a very tenuous capital structure .

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