NEW YORK—Six Flags Inc., the operator of 20 amusement parks in North America, buckled under the weight of the U.S. recession and filed for Chapter 11 bankruptcy protection over the weekend.
According to filings with the U.S. Bankruptcy Court in Wilmington, Delaware, Six Flags owes Bank of New York Mellon more than $500 million and HSBC Bank $400 in unsecured bonds.
Six Flags has sold numerous attractions over the past several years to raise cash, but still runs 20 parks spanning from Mexico City to Chicago to New Jersey. Thirty-six affiliates of the company also filed for protection from creditors on the same date.
The theme park company had over $2 billion in debt, and faced $288 million in redemption of preferred shares this August. Six Flags is seeking approval for a prearranged agreement with certain senior secured lenders to convert $1.8 billion of debt into equity and eliminate more than $300 million in preferred stock obligations.
In a letter to company employees, Six Flags CEO Mark Shapiro said that the bankruptcy resulted from the “unsustainable $2.4 billion debt load from the previous management team.”
“Furthermore, we have over $400 million of debt coming due within the next 12 months that cannot be refinanced in these financial markets,” he wrote.
Operations at Six Flags parks will continue as usual and employees should expect to be paid on time.
“We intend to emerge from these proceedings in the coming months with a significantly improved balance sheet and greater operational and financial flexibility,” Shapiro said.
Although theme park attendance has crept up in recent months, Six Flags has not had a profitable year since 1998.
Daniel Snyder, Bill Gates Lose Out
The bankruptcy is a major blow to media and marketing magnate Daniel Snyder, the current owner of NFL’s Washington Redskins.
Snyder took control of the company in a highly publicized and contentious boardroom battle in 2005. At the time, Snyder wrote in a letter to shareholders that they “would have been better off hiding their money under a mattress” than trusting the management team of Six Flags at the time, the Wall Street Journal said.
He won three board seats in the proxy battle and installed former ESPN/ABC executive Mark Shapiro at the helm. But Snyder’s management has been unable to return Six Flags to profitability in three-and-a-half years.
Under the bankruptcy agreement, if approved, Snyder’s six percent stake in the company may be wiped out.
Other unfortunate shareholders include Microsoft founder Bill Gates’ Cascade Investment LLC, which has an 11 percent stake in Six Flags, and Citigroup Inc. with a 9 percent state.
Traffic Down
First quarter revenues, including Spring Break and Easter traffic, at Six Flags were down about 10 percent compared with last year.
Its Mexico City location was also shut down by the swine flu outbreak in Mexico, costing the company 16,000 people in attendance.
In a conference call with analysts to discuss first quarter earnings, Shapiro also mentioned that the planned Six Flags in Dubai would be delayed for at least one year.
But the company is optimistic that the recession would benefit the amusement parks industry as more families shun costly travel to stay local this summer. “Stay-cations are a reality for most families today and it’s in that kind of environment that Six Flags is truly a force,” Shapiro told analysts.
