March 10, 2010
Six Flags filed bankruptcy at the end of 2008, at which time CFO Jeff Speed assured investors the bankruptcy would only take 4-5 months. Over one year later, the company is still contending against its creditors. The company operates 20 theme parks in the United States and has been a headache for its largest shareholder Daniel Snyder, owner of the Washington Redskins.
According to Bloomberg, “The New York-based owner of 20 theme parks filed a petition in U.S. Bankruptcy Court in Wilmington, Delaware, on June 13, listing assets of $3 billion and debt of $2.4 billion as of Dec. 31. Six Flags is seeking court approval of a prearranged reorganization plan to cut its debt by about $1.8 billion and to eliminate more than $300 million in preferred stock obligations, the company said in a statement.
Emerging from bankruptcy before the end of the year is an “aggressive” estimate, said Joseph Stauff, an analyst at CRT Capital Group LLC in Stamford, Connecticut.
Under the proposed plan, senior secured lenders would receive about 90 percent of the stock in the reorganized company, while unsecured bondholders would get about 10 percent, CreditSights Inc. analysts Chris Snow and Frank Lee wrote in a report. Six Flags offered unsecured bondholders 85 percent in a recent debt-for-equity exchange, they said.
Six Flags’s largest shareholders include Chairman Daniel Snyder, owner of the National Football League’s Washington Redskins. He owned 5.4 percent of Six Flags, or 5.28 million shares, as of October 2007, according to data compiled by Bloomberg.
Snyder won a proxy fight in late 2005, ousted then-Chief Executive Officer Kieran Burke and appointed himself, now-CEO Mark Shapiro and director Dwight Schar to the board. Under Shapiro, the company has sought to clean up the parks and add family-focused attractions, such as Thomas the Tank Engine and Looney Tunes.”
According to Maureen Bavdeck of Reuters, “Warring creditors of Six Flags Inc (SIXFQ.OB) take their battle for the theme park operator before a bankruptcy judge on Monday, with the outcome likely hanging on how much debt the company can afford.
Holders of senior bonds will tout their plan, which leaves them in control of the company, as the best way to bring Six Flags out of bankruptcy with a manageable amount of debt.
Junior bondholders are likely to argue that the operator of 19 regional parks can borrow more and pay all creditors what they are owed. Their plan would leave them in control of the company.
The junior bondholders will also argue the senior bondholder’s plan cannot be confirmed because they voted to reject it.
The trial is scheduled to last two weeks, with potentially dozens of witnesses taking the stand and thousands of documents entered as exhibits with the aim of convincing Judge Christopher Sontchi of the company’s true value and each plan’s viability.
However, the hearings will go forward without Six Flags’ Chairman Dan Snyder, who will not testify, according to the company’s attorney.
Senior bondholders, known as SFO Noteholders, have drafted a plan that has been adopted by the company. Led by Avenue Capital Group, which invests in financially troubled companies, the plan will fund the exit from bankruptcy with some $830 million in debt. The SFO Noteholders would also invest $450 million in equity.
Under the SFO Noteholders’ plan, most secured claims would be paid in full. Junior bondholders, known SFI Noteholders, would get about 7.3 percent of the reorganized company’s equity and the rest would go to holders of SFO notes and management.
The Avenue Capital-led group has been arguing that is only one plan because the SFI Noteholders could not finance their plan. “This long-promised plan remains just that — an unfilled promise,” SFO Noteholders said in court papers of the alternative plan.
That changed on Friday, when the SFI Noteholders informed the court they had committed funding for their plan, which includes $1.17 billion of debt and $582 million of equity.
The SFI Noteholders proposed paying everyone senior of their own debt in full and taking control of the company.
With the committed financing, the SFI Noteholders will be able to argue the market has spoken about the value of the company. As a result, the outcome may hinge on more technical issues about the structure of the company’s plan, voting procedures and certain assets that attach to SFI bonds.
While the trial plays out in public, behind-the-scenes talks are likely to continue, although the burden is on the SFI Noteholders to craft an offer to win over Avenue Capital.
Six Flags might seem to be an unlikely target of such an expensive tussle. The company has largely been unprofitable for more than a decade.
However, some of the debt that sunk the company was incurred to build bigger and better attractions and roller coasters, which now will protect the company from potential competition.
In addition, a sluggish economic recovery has made the regional theme parks an affordable “stay-cation” alternative to long-distance holidays for cash-strapped American families.
The case is In re: Premier International Holdings Inc, U.S. Bankruptcy Court, District of Delaware, No. 09-12019.”