Bankruptcy possibility looms for Six Flags

http://www.crainsnewyork.com/article/20090313/FREE/903139987

March 13, 2009
Bankruptcy possibility looms for Six Flags
In its annual report on Wednesday, the New York-based theme park operator company said a Chapter 11 filing is possible if it cannot reach a deal to restructure its debt.

(AP) - Shares of Six Flags Inc. fell Friday on growing speculation that the theme park operator may be forced to file for bankruptcy protection after the company said it could not meet a looming financing obligation.

Six Flags shares, which have traded under $1 since last September, lost 3 cents, or 16.8%, to 16 cents in morning trading. The stock has traded between 16 cents and $2.50 during the past 52 weeks.

In its annual report on Wednesday, the company said a Chapter 11 filing is possible if the New York-based company cannot reach a deal to restructure its debt. Chapter 11 bankruptcy frees a company from the threat of creditors' lawsuits while it reorganizes its finances.

In its fourth-quarter earnings report on Tuesday, Six Flags said it does not expect to have enough cash to redeem its preferred income redeemable shares, or PIERS, when they mature on Aug. 15. The shares, known as PIERS, must be redeemed for $287.5 million plus accrued and unpaid dividends, which may total up to $31.3 million.

If the company defaults on its PIERS maturity, it would constitute a default that would allow its lenders to demand payment on other financial obligations.

Six Flags said a Chapter 11 filing could occur "well in advance" of the PIERS's maturity in August, if the company decides an out-of-court agreement is not possible or to its advantage.

The upcoming PIERS obligation has been an ongoing concern for Six Flags investors. The company has skipped making its PIERS dividend payments since last May, noting that unpaid dividends accrue without interest.

Last September, Moody's Investors Services downgraded Six Flags' corporate family and probability of default ratings to a "Caa2" junk grade, saying it did not expect the company to have enough free cash flow or credit capacity to redeem the shares.

Moody's also expressed concern about Six Flags' $131 million senior unsecured notes, which mature in February 2010.

A Six Flags representative was not immediately available for comment on Friday. The company has scheduled a conference call with its investors before the market opens on Monday to discuss its fourth-quarter results.

On Tuesday, the company reported that its losses widened in the fourth quarter to $206.6 million, or $2.12 per share, as the company's income tax expense spiked.

Six Flags is the world's largest regional theme park company with 20 parks across the United States, Mexico and Canada. It plans to expand beyond North America with destinations in Dubai and Qatar, according to the company's web site.