Got this off of Scottrade this morning anyone else see this? And what does it mean?
Without restructure of debt, Six Flags to file for bankruptcy
Monday 03/30/2009 7:23 PM ET - University Wire
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Six Flags Inc. might be in for an upsetting ride as they are teetering on the brink of bankruptcy.
The New York-based owner of Six Flags Great Adventure in Jackson, N.J. and 19 other theme parks across the country said in a regulatory filing that unless successful debt restructuring occurs the company will need to file for bankruptcy court protection.
Great Adventure Public Relations Manager Angel Aristone said the restructuring of debt would have little effect on the park's 2009 season.
"The company is in active discussion with our lenders, but the restructuring of debt is a back-of-house issue that has zero bearing on our park or day-to-day [operations]," Aristone said. "We've got spectacular attractions and entertainment planned at our park this summer."
John Longo, a Rutgers University clinical associate professor of finance, said some of Six Flag's problems are due to the recession, since visiting an amusement park is a moderately priced discretionary spending item.
"The company is losing money due in part to the weak economy and doesn't have enough cash on hand or through credit lines to pay an upcoming debt payment. If it misses the payment it will go bankrupt," Longo said.
The company has $287.5 million of Preferred Income Equity Redeemable Shares due Aug. 15, according to a March 11 regulatory filing. The payout to preferred stockholders could run more than $318 million when accrued and unpaid dividends are factored in.
Six Flags may have to request a pre-packaged or pre-arranged Chapter 11 filing if it can't reach a restructuring agreement with the PIERS holders out of court, according to the filing.
Longo said Chapter 11 bankruptcy leads to reorganization, as opposed to Chapter 7, which results in liquidation.
"In the event of Chapter 11, the parks will remain open. Most consumers won't know the difference," Longo said. "The stockholders will get wiped out and the bondholders will lose part of their expected payments. Eventually, new debt and equity will be issued."
Longo said the company has a high fixed cost structure due to their business and high levels of debt.
For the first time in the company's history a positive cash flow was achieved, according to a March 10 Six Flags Inc. press release. In addition, operating income more than tripled to $144 million while total revenues increased by 5 percent and attendance went up 2 percent.
In the press release, President and Chief Executive Officer of Six Flags, Inc. Mark Shapiro said there would be a three-year turnaround for Six Flags.
"I am proud and grateful that the efforts and commitment of our workforce -- some 30,000 strong -- resulted in our best year ever, putting our operations back on solid footing," Shapiro said. "The remaining challenge is the inherited balance sheet and we are in comprehensive dialogue with our lenders to remedy that issue."
C. Richard Kamin, a government affairs agent who represents Great Adventure with the firm MBI-GluckShaw, said given the current financial climate, restructuring isn't necessarily a bad thing.
"I think that a lot of this is positive, as it showcases businesses' and corporations' ability to react to the current fiscal crisis," Kamin said. "When there's adversity there is also opportunity, and I'm sure that the leadership at Six Flags is positioned to seize that."
School of Arts and Sciences senior Jakub Malecki said he thinks the company will eventually be forced into Chapter 7 bankruptcy and liquidation.
"The water park should be closed. I went there and I was waiting [in line] for two hours. I'd rather go to the Poconos or somewhere else," Malecki said.
School of Arts and Sciences sophomore Jennifer Allegretta said she enjoyed visiting Great Adventure with friends and family.
"It gives people a deviation from the normal complexities of life," Allegretta said.
School of Arts and Sciences sophomore Robert Gulya said he would support a theme park industry bailout.
"[Great Adventure] offers people a semi-inexpensive day trip that they can take in the area. I think it's a really good park," Gulya said. "It's part of my childhood."
Longo said he hopes Great Adventure remains open.
"I now have a 5-year-old son and plan to take him there at some point over the next few years," Longo said.
Six Flags Great Adventure and Wild Safari will continue to open on April 4 to kick off its 2009 season.
