Six Flags Ad Hoc Bondholders Preparing For Big Valuation Fight

Even as Six Flags' OCC (Official Credit Committee) was being formed in Delaware last Friday, with naive participants such as BoNY, HSBC, Esopus Creek Capital, Schottenfeld Associates, John Gorman, Whirley Drink Works and Coca-Cola (the last two must be royally pissed as all their advance profits on $9.95 small cups of soda have just become General Unsecured Claims) all hoping for some meager recoveries, and financial advisors (Broadpoint, Chanin, Moelis, Mesirow, BDO and Peter J Solomon, all of which are now overnight specialists in the amusement park business) trying to bedazzle the committee with their pretty charts and glass beads (and in the case of some, expansive dinners at Tao, where engagement letters were hoped to be signed on the naked backs of blonde, barely legal, Ukranian imports), the ad hocs were preparing for war according to Debtwire.

As Zero Hedge noted previously, the Six Flags prepackaged plan envisioned a massive cram down of virtually everyone who was not a secured lender. This ended up pissing off one Marc Lasry and his Avenue Capital to no end. Alas, Clinton-clan scion Chelsea is no longer around to have some heated discussions (presumably with the ever-convincing wingman Steve Rattner on the line) with Mark Shapiro over what is best for the economy and for the Avenue Credit Fund. As a result, Avenue, which holds approximately 40-50% of the Six Flags 12.25% OpCo notes, and 10% of the bank debt, has hired Akin Gump and Barclays as legal and financial advisors, and basically instructed them to go to town on the Six Flags valuation. As existing lenders are currently envisioned receiving 92% of the pro forma equity, pretty much everyone below them is rightfully pissed.

However, Avenue and straggler Fidelity will likely have their work cut out for them: good luck proving to a judge that in the biggest depression ever (sorry 1930's, you were just demoted), a bankrupt amusement park can fetch anything even remotely close to a 7x valuation, especially when you nearest comp Cedar Fair is already trading inside of that.

Then again, if the government is really set on determining a FMV for the S&P of a Abby Joseph Cohen orgasm inducing 2,000, then by all means Avenue has a definite chance of succeeding in not only getting uncrammed, but getting awarded huge warrants in addition to 100% of the equity, and free Medusa rides for life. We wish them all the best. Sphere: Related Content

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Another DIP Roll-Up, This Time Milacron

The latest bankruptcy comes from Milacron, a supplier of plastics-processing technologies and industrial fluids. Preventing the company's immediate liquidation is an $80 million DIP ($40 million in new money) obtained from Avenue Capital and DDJ which together held 78% of the Company's $225 million 11.25% now defaulted notes. Additionally, GE would provide Milacron with a $55 million DIP revolver. The hedge funds are hoping to purchase the company's assets in a bankruptcy sale process:

Avenue Capital and DDJ, together with eligible Noteholders who accept an invitation to participate in the transaction, would purchase substantially all of the company’s assets. In return for these assets, the agreement contemplates that, among other things, the participating Noteholders will repay the full debtor-in-possession facilities, including a new revolver, assume certain of the company’s ordinary course liabilities and provide additional consideration to Noteholders who do not participate in the acquisition. The acquisition is intended to permit Milacron to continue as a going concern with substantially less debt.

The theme of existing creditors being unwilling to be crammed down by new secured money continues. New DIP providers will have an uphill battle to climb when convincing pre-petition lenders who are significantly underwater on existing investments (i.e. DDJ and Avenue's bond holdings) and are the de facto equity owners, to bear the risk of reduced recoveries when the cost of throwing some more extra money at the company (thereby buying the time needed for at least an orderly asset sale) is negligible. But we still keep our eyes open for that one elusive case when a DIP comes not from a pre-petition lender but from an external party... Still to come (we revise the assumption that Magna Entertainment's DIP was new money, as the lender was obviously very entrenched in the company's balance sheet). Sphere: Related Content

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Avenue Distressed Debt Head Is Also Outtahere

The exodus continues as things smell fishy in the house of Lasry: first Chelsea, now Bruce Grossman, formerly head of U.S. distressed-debt strategy at Avenue, and whose book was $7.7 billion out of Avenue's total $17.2 billion in November (now both likely a tad lower). Marc Lasry (who in Katherine Burton's hilarious Hedge Hunters is portrayed as hiring analysts after a game of backgammon. Hey Bloomberg - when are you issuing Hedge Hunter 2: The Survivors?) is left scratching his head as to who will replace Bruce. Allegedly the proposed replacement is Rob Symington, who had spent 13 years at Resurgence Capital prior to joining Avenue in 2005. Seeing how Avenue is (or was) considered one of the greatest distressed-debt hedge funds, we with them godspeed in smoothly integrating a portfolio manager who will manage their distressed assets to new heights. Sphere: Related Content

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