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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Fontainebleau Fiasco Soon To Get Epic

And some thought yesterday's bankruptcy of LV casino Fontainebleau would be the end of it. Today a new lawsuit has erupted, this one seeking unspecified damages from a variety of defendants, most prominently Bank of America. According to the Las Vegas Sun:

Bank of America and other banks, already accused by Fontainebleau of wrongly shutting off construction financing for the resort, were sued Tuesday in U.S. District Court in Las Vegas by about 120 investment companies that have loaned money to the project. The investment companies are mostly little-known limited liability companies.

Their lawsuit accuses Bank of America of improperly inducing the investment companies to loan the project hundreds of millions of dollars -- and of then improperly teaming up with other banks to cut off their own financing to the resort.

First, the suit says Bank of America, as lead banker for the project and disbursement agent for construction monies, approved a construction loan draw request in which the investment companies in March advanced $336 million to Fontainebleau.

But, the lawsuit charges, Bank of America's approval of this draw was improper because Bank of America should have known the borrower was already in default on part of its loan agreement; or should have blocked the loan due to misrepresentations.

Second, the investment companies say Bank of America and the other banks were then wrong to assert the borrowers were in default in denying access to a separate $790 million revolving loan -- and have not specified what the event of default is.

If there is no actual default on the part of Fontainebleau, the investors claim, B of A and the other banks are now wrongly failing to fund their loan commitment of $790 million -- funds Fontainebleau has said are needed to finish the 70 percent-finished resort.

The investment companies say they were approached in 2007 by a syndicate of investment bankers and asked to participate in $1.85 billion in bank financing for the resort. Besides the bank financing, the project was supposed to be built with cash provided by the borrowers and a $675 million second mortgage note offering, the suit says.

Of the $1.85 billion in bank funding, the first $700 million was funded as a term loan in 2007 and included funds provided by the plaintiff investment companies, the suit says.

Another $350 million was to come from a delay draw loan and the final $800 million was to come from the revolving loan, the suit says. The plaintiffs say they were to fund the draw loan and that the defendant banks were to fund the revolving loan.

Interestingly, among the investment company plaintiffs the first one is Avenue CLO Fund Ltd. More likely than not this is a CLO managed by pro-cyclical distressed debt "veteran" Marc Lasry. It will be interesting how this gets explained away to LPs, by the very same man who has an "intolerance for losing."

Parallel with this lawsuit, Fontainebleau has filed a Motion Seeking Immediate Funding to Resume Construction.

Fontainebleau Las Vegas has asked the Honorable Judge Jay Cristol, who is presiding over the Chapter 11 proceedings, to order the revolving banks against which Fontainebleau Las Vegas has brought suit to fund $656 million they had refused to fund on March 3, 2009. That failure ultimately led to the decision by Fontainebleau Las Vegas to seek Chapter 11 bankruptcy protection on June 9, 2009.

"Prompt adjudication of this motion will assist in the ultimate disposition of this case by establishing the Revolver Banks’ breach and Plaintiff’s right to hundreds of millions of dollars in additional cash collateral," Fontainebleau Las Vegas lawyers wrote in their motion. "Indeed, a favorable resolution of this litigation is the only means by which to obtain funding to complete construction of the project."

Fontainebleau Las Vegas alleges that the revolver banks “seized upon a deliberate misreading of the credit agreement to evade their obligations.” The lenders claimed that a March 2 notice of borrowing for $656 million did not comply with the credit agreement because a term-loan facility had not been fully funded. But Fontainebleau Las Vegas alleges that the plain terms of the credit agreement required that the term loan be “fully drawn,” which the March 2 notice of borrowing accomplished.

The revolver lenders are led by Bank of America and include: JP Morgan Chase, Barclays Bank, Deutsche Bank Trust Company Americas, The Royal Bank of Scotland, Sumitomo Mitsui Banking Corp., Bank of Scotland, HSH Nordbank and MB Financial Bank.

Looks like another soap opera in the making, compliments of the collusive and heartless b'stards at BofA and DB. 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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