Six Flags sale financials

Ok, maybe this doesn't deserve it's own topic, but I can't figure this one out. Six Flags has nearly $2 billion in debt, this we all know. Now, let's assume that rather than a complete takeover (which I feel is unlikely), there's a breakup (which I feel is more likely).

My hypothetical would be a couple of parks go independant, a new Six Flags company is formed with the 5 largest parks, and maybe Cedar Fair and KennyCorp pick off a few (FT? DL?). So in that situation, where would that $2 billion go? Is that debt sent out to each park by value? Like if Darien Lake was worth 11% of the entire company worth, and KennyCorp bought the place, would KennyCorp have to absorb 11% of a $2 billion debt? Or does the debt vanish into thin air because the corporation, Six Flags Inc., would cease to exist? Wouldn't the people Six Flags owes money to have some sort of say in this whole deal?

Debt does not vanish. Each purchase agreement would specify how much debt goes with a park, if any. If a company bought the entire company, they get all their assets and liabilites.

In a nutshell:

the Six Flags company is $2billion in debt. The parks themselves each have no debt. Thus, if a(n) individual park(s) is/are sold, the buying company does not acquire any of the debt unless they agree to shoulder a portion of the debt to make the deal more appealing to SFI. However, to buy the entire company, you're buying the entity that has the $2billion debt. This is what makes it highly unlikely that a company like Cedar Fair would buy the entire Six Flags company.

I said this in another post on the issue somewhere.. it's like an apple tree. If you uproot the tree and take it with you, the apples come along. However, if you pluck an apple, the tree and all its roots stay put.

Does anyone know exactly who has given them this 2 billions dollars? Banks? Investors?

What kind of collateral do they have? What kind of control over the company?

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Impulse-ive said:
Six Flags has nearly $2 billion in debt, this we all know.

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Actually according to today's balance sheet, it's $2.1 billion but add on other liabilities and you're more at $2.7 billion. Total liability is actually growing each quarter. Although they did manage to pay off a whopping $3 million of their long term debt between March and June of '05

That's not the kind of numbers you take lightly.

*** Edited 10/12/2005 1:07:20 AM UTC by Red Garter Rob***

Ok, so it's more along the lines of what I thought ... I like your apples analogy. So why aren't the people who Six Flags owes all this money to a little more up in arms? If I stood to lose $2 billion (or even $1 billion giving them a generous assumption that they could raise 1B from selling parks) I think I'd give the issue more than a passing glance!

Wow what a f'in mess ...

If Burke & co. ever get another job at the level they're currently at, that hiring manager should be beaten with a rusty spoon ...

Anyone know how much they're looking to fetch for Astroworld?

But even if you take the amount CF paid for GL ($145million) * how many parks does SF still own? to raise 2billion, you'd need 14 parks, assuming you get the same amount for each... now keep in mind the ones like GAdv and MM with a lot to offer can go for much higher... I don't think they have anything to worry about even if they DO sell everything. Also, keep in mind that it was stated that the sale of SFAW was dependant on approval from the creditors, although it was highly unlikely that they would veto such a move.

You also have to remember the $145 million deal for GL included ALOT of land. Most of the parks don't have that and are actually alot smaller than GL so I highly doubt you'd get $145 million per park. Yes some will go higher but when a company is in trouble and needing to raise money, the blue light specials start to show up real fast.

So, just wondering, if all the parks are sold, and the company (be it SFI, or whatever is left with the Debt) still has 2Bill in debt., couldn't they just file for Bankruptcy?

They'll be lucky to fetch $100m from the Astroworld land sale. A drop in the bucket of what they owe. At best helps them make their payments for this year. But what about the following year? The year after that?

A $100m is certainly less than AW alone could have profited the company in the next couple years, but not over the long run. And further, that's one less major park generating revenue for the chain for the 2006 season. Take SFNO out of the equation as well and 06 doesn't look too good for Six Flags.

I don't believe that 100 mil would even cover their interest on the 2 bil debt.
I simply find it hard to believe that they ended up that far in the hole. Yeah, I know it happens to company's, it just seems ridiculous.

But by closing a park you also save the operational expenses of said park. Which also will be saved at SFNO if it is not operational. They will take a hit with taxes for SFNO.

As for selling the parks there are 30 said parks in the chain if they get 100 million for each park it would be 3 billion. Which could eliminate the debt and pay expenses for the sales but that is about all. So maybe that is what is about to happen Liquidation of the parks to whoever they can and then disolve the Six Flags company.

Tekno, to answer your question if the debt is not able to be canceled by the sale. Yes, SFI could and would most likely declare bankruptcy.

(disclaimer : see LG's disclaimer below)

edit to add disclaimer :)

*** Edited 10/12/2005 7:07:08 PM UTC by dragonoffrost***

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As for selling the parks there are 30 said parks in the chain if they get 100 million for each park it would be 3 billion.

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Or you could sell 20 at that average price and be left with a core of 10 parks and no debt making the company much more managable and potentially profitable.

Kind of like hitting the reset button. :)

Imagine something like selling enough to pay off much/most/all debt and being left with SFGAdv, SFGAm, SFMM, SFOG and the Texas Parks and one other regional park that makes sense (SFNE, SFDL, SFA - whatever).

7 strong parks and no major debt issues. Seems a lot closer to what the other chains are sitting on.

(disclaimer - Post not based on fact, truth or knowledge of any kind. Just having fun speculating on unrealistic scenarios. :) )

Do I get to sue you for taking my ideas LG? ;)

No. You just sign this paper saying you never said anything close to that and that the idea was totally my own creation.

Next time I promise not to just skim the topic. :)

At any rate, it's a compelling idea regardless of how far fetched it may be.

*** Edited 10/12/2005 8:00:18 PM UTC by Lord Gonchar***

Must ... sign ... paper ... LG ... says ... so ... ;)

No biggie, just when they're looking for a CEO, I got dibs ...

You cannot just break apart a debt-ridden company. Any sales of assets have to be approved by the creditors. I'm not sure where you guys are coming up with 30 parks, they only own about 17 amusement parks and a handful of water parks. Keep in mind that Six Flags Inc. does not own SFOG, SFOT, SFNO, SFMW or LaRonde.

As to the question of to whom they owe all that money, it is a combination of banks and investors. The collateral consists of the parks they do own including the land and the rides. Don't forget that Burke and company were masters at creative financing before they got into the theme park business.

"You cannot just break apart a debt-ridden company. Any sales of assets have to be approved by the creditors".

Wanna make a bet?

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dragonoffrost said:
But by closing a park you also save the operational expenses of said park. Which also will be saved at SFNO if it is not operational. They will take a hit with taxes for SFNO.

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Uhhh... the revenue generated by the park being OPEN more than offsets the operational expense. How is this an advantage?

The creditors have nothing to say about anything at this time, as long as they keep making their payments. The only time that they would is if SFI files for reorganization. Then the rush to claim what's left of the pie will begin