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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Avenue Capital Discloses Previously Confidential Six Flags Information

An odd PR disclosure came out of Avenue Capital today, which basically makes fully public information, that newly bankrupt Six Flags had considered to be confidential...until today. One Tyler Durden even asked a question of SIX CEO Mark Shapiro, at today's prearranged call specifically designed for bloggers, based on SIX creditor Avenue's just-released documents, which answer however left a little to be desired (in all honesty I would need to check on the transcript as at one point, during my Q & his A, I drifted off, more curious as to the color of MC Cabrera's sweater).

In a peculiar twist, the Avenue PR had this very odd language in it, which I have never seen before, especially when confidential information become public domain:

Under the Confidentiality Agreement, dated April 22, 2009, Avenue is entitled to disclose certain information if the Company fails to do so. While the Company has advised Avenue that it does not believe the information provided to Avenue on May 21, 2009 is required to be disclosed, is hypothetical and stale, Avenue is disclosing the information set forth in this paragraph and on Schedule 1. On May 21, 2009 the Company provided EBITDA information of $240 million, $265 million, $285 million and $310 million for the years 2010, 2011, 2012 and 2013, respectively, and capital expenditure information of $105 million for 2010 and $110 million for 2011.

Now what the basis of my question was, for those that may have missed the call (i.e., pretty much everyone), was the conclusion of the calculation on page 2, "Potential Liquidity Requirements - Fiscal 2009" analysis. An observation of either the Subtotal Liquidity Line of the Total Potential Operating Liquidity Line, indicates that the company will burn more cash than it will generate in 2009: either $50 million gross or $150 million net of minimum W/C liquidity. What is odd is that, as Zero Hedge noted, Six Flags entered in a prearranged bankruptcy without a DIP line in place.

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This could be a very foolish proposition, as it effectively bets the future of the company on a speedy reorganization: if the prearranged bankruptcy process encounters a snag and the company discovers it needs additional sources of funding, it will not pass go, but will go straight to Chapter 7. Furthermore, in this still DIP constrained environment (but much looser than 5 months ago), it would not be surprising if the company did canvass for DIP interest but was unable to obtain one.

Now Zero Hedge shares Mr. Shapiro's enthusiasm for a speedy turnaround, but is concerned that this line of action could be myopic. As the bondholders end up getting crammed down and receive only 10% of the company, it is expected that one or several splinter groups will emerge threatening a quick turnaround, instead forcing a lengthy bankruptcy process. And if this information, which according to Avenue came from the debtor direct is accurate (and at first blush there is no reason to assume it isn't), then come December 31, Six Flags will be in dire need of $50 million dollars and no place where to obtain it. Of course, in a liquidation, the company's OpCo notes, which were trading in the mid 60's will have some difficulty generating any returns whatsoever.

All in all, this is quite a peculiar bankruptcy process, and Zero Hedge will follow this case with close interest, while focusing specifically on any marginal business pick up at the main competitor - Cedar Fair - which may end up benefiting from this process in more ways than one.
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Six Flags: Bankruptcy Edition

Zero Hedge would like to share with readers the latest and greatest from Six Flags, whose bankruptcy seems to have had no impact on corporate-blogger relations:

Hey Tyler ,

I hope this email finds you well…it’s xxxx again with the latest update :)

We know that you and many of your readers have been seeing the news reports about Six Flags' bankruptcy filing earlier this weekend. We can assure you that this is a corporate issue, and it does not affect the day-to-day operations of the parks. Our parks are open this weekend, and will continue to be open with more new rides and attractions and longer hours all summer.

I'd like to share with you a letter from Six Flags CEO Mark Shapiro that he sent to park employees earlier today:
http://www.sixflags.com/national/footerNav/News_OpenLetterFromOurCEO.aspx

For more insight, I want to invite you to join Mr. Shapiro for his first blogger conference call this Monday, where he will give more information on the parks and take your questions about the great future we have planned for the months and years ahead.

Following record performance in 2008, which completed the three-year turnaround of our system-wide park operation, our restructuring deal to clean up the balance sheet paves the way for a full revival of the company and we want to ensure you, and your readers, have an opportunity to hear about our plans for the future directly from Mr. Shapiro.

The conference call is scheduled for this Monday, June 15, 2009 at 3:30 pm EST. Please let us know via email response if you would like to join us for the call and we will send you the conference call details directly.

We hope that you find this information useful and look forward to hearing from you later this week.

All the best,

xxxxx

Zero Hedge will be first in line (hopefully waiting less than the requisite hour for comparable proverbial "rides") for Mr. Shapiro's call as he further clarifies the amusement park's shift in strategy which presumably includes a thing called profitability, especially now that the nasty carryover of the old management regime (which for better or worse has been gone ever since Dan Snyder won the proxy battle some time in 2006 so almost 3 years ago) will be forever eliminated along with all that debt.

In other news, Zero Hedge also would like to share Wmbanzai7's take on what promises to be a wild and vomit-inducing ride on Wall Street's rickety zero G wooden rollercoaster once the SPOO pre/postmarket/3:59pm bid disappears.

***

BANZAI7 NEWS--Six Flags, the big theme park operator, filed for bankruptcy in early Saturday morning in Delaware after failing to reach an agreement with lenders over a plan to reorganize its debt outside of court.

Six Flags's proposed a reorganization plan that includes exciting new attractions with timely financial services themes including:

HANK AND BEN'S SUBPRIME FRIGHT NIGHT COASTER

HANK AND BEN'S SUBPRIME FRIGHT NIGHT COASTER will transform guests into seedy citizens of Wall Street, where they find themselves caught in the middle of a city under siege and torn apart by Alan Greenspan the fractional reserve Riddler and Milton Friedman, the cruel free market Joker. Venturing through demented hallways of twisted derivative trades, oblique policy turns and hallucinatory correlations, riders speed through six 180-degree DJIA hairpin's, climb unseen hills of toxic assets, plunge into pitch balance sheet darkness and dip into unforeseen "Black Swan" like outlier dangers.

VIKRAM BANDIT'S BIG SPIN

Vikram Bandit's Big Spin — A Gerstlauer PR spinning coaster, "this unique public relations spinning coaster gives riders the opportunity to defy the laws of financial services gravity just like Vikram Bandit, the memo bloviating legend himself. With random and unpredictable verbal twists and techno-babbling spins at each market dip and turn, this CITI bailout sponsored coaster offers a unique ride experience for all stakeholders every time."

LLOYD BLANKFEIN'S WIGGLE OUT WORLD

"BLANKFEIN'S Wiggle Out World is designed to leverage and wiggle Goldman Sach's out of a hair raising squeeze using its world-wide recognition and status among financial regulators and policy makers ages 2-6, featuring rides, shows and attractions the entire United States Financial Services regulatory family can enjoy. The new area will include specially themed Goldman Wiggle out rides, including Hank Paulsens's Big Bailout Car and Steve Friedman's Big Red Escape Plane rides, as well as a new Timmy G Toxic Turd retail location and a Larry Sommers Yummy Dummy Investor Cafe. In addition, The Goldman Wiggles are scheduled to appear at the park on a to-be-announced date in 2009. The Great Wall Street Escape also will debut a thrilling new waterslide, Wild AIG Wedgie, in its Subprime Derivative Splashwater Kingdom water park."

ALAN THE MAESTRO'S INVERTED YIELD COASTER

Maestro's Ultimate Inverted Yield Curve Coaster — "Adding a powerful new dimension of twisted monetary thrill's to an already irrationally exuberant coaster line-up, Maestro IYC will feature a unique radiating blue steel track and high-speed yellow and blue trains that suspend riders from short and long term coaster tracks. Once aboard the suspended 28-passenger interest rate trains, the bottom drops out from beneath the riders and they soar out of the real estate asset bubble station four abreast to experience spine-tingling gravitational market forces and the sensation of racing totally unregulated at 80 mph with nothing beneath their 401k feet but cloudy sky."

GLOW IN THE DARK TOXIC ASSET PARADE

Glow in the Dark Toxic Asset Parade at Six Flags Great Subprime Adventure "Six Flags is taking the asset backed security parade concept to new subprime levels as bull market drummers, shyster bankers, political puppeteers, psychotic quants, crooked mortgage brokers, unscrupulous real estate brokers, and kinetic regulatory stilt walkers bring the park streets to life with an unparalleled nighttime financial fantasyland of interest only mortgages, riskless securities, pay option loans, no document loans, VAR fantasy lights and bear trade commotion. Glow in the Park Toxic Asset Parade features the latest quantitative finance technology, state-of-the-art collateralized debt floats and special credit enhancement effects with thousands of sparkling rating agency lights adorning every element of this uniquely themed toxic asset parade."

BERNIE THE PONZI ENGINEER

Bernie the Ponzi Engineer — This attraction entertains sophisticatedly naive investors of all ages, offering wealthy retiree's, brainless asset managers and SEC enforcement attorneys a ponziesque train ride through Bernie's mythical trading room on the French Riviera Island of Absolute Returns, Bernie-themed play areas, and appearances by Clown Commissioner Christopher Cox, Controller of the SEC's ponzi sanctioned Railway, who will pose for photos and greet visiting investors. A Bernie & Friends store located within the areas will feature an assortment of pre-owned Palm Beach merchandise.

DICK FULD'S ROOM FULL OF SMOKE & MIRRORS

Dick Fuld's Room Full of Smoke & Mirrors takes the financial smoke and mirror funhouse concept to the absolute last minute. Packed full of opaque accounting tricks, toxic asset hazards, valuation illusions, securitisation fakirs, shifty Korean and Arab investors, short selling bogeymen chasing bikini clad CFO's and a Mega subprime CDS ticking time bomb, Dick Fuld's Room Full of Mirror's will leave spectators young and old totally unbailed.

HANK GREENBERG'S HOUSE OF AIG HORRORS

Perhaps the scariest attraction ever created, Hank Greenberg's House of AIG horrors will not be beat. Packed full of all manner of subprime ghouls, vampire toxic asset salesmen, financial skeletons, CEO ghosts, litigous zombies, blood thirsty regulators and Goldman Sachs derivative traders, Hank will make sure your NAV will never see the light of bailout day. Sandy Weil says: "I thought I had the systemic house of horrors racket cornered, but Hank Greenberg beat me to the bailout punch." Sphere: Related Content

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Fidelity 1: Six Flags PR Department 0

It seems like it was just yesterday when Six Flags' PR department was assuring Zero Hedge and its readers of just how fabulous things were at the theme park better known as the juvi delinquents cigarette break hang out (and the only place in the world where you can buy small cups of Diet Coke for the Bernanke wet dream price of $9.95). Maybe if the theme park was monitoring its operations with the same mad skills as it was overseeing any potentially adverse PR, the company would not have had to file for bankruptcy (about which Zero Hedge was warning as recently as January 15)... Which it did today much to Fidelity's amusement.

Six Flags said it filed for Chapter 11 protection with the unanimous support of its lenders' steering committee.

The plan will result in a deleveraging of the company's balance sheet by about $1.8 billion, as well as the elimination of more than $300 million in preferred stock obligations.

"The current management team inherited a $2.4 billion debt load that cannot be sustained, particularly in these challenging financial markets," Mark Shapiro, the chief executive of Six Flags, said in a news release.

Great work Mark: taking a cue from the admin and placing the blame squarely on the previous management.

In addition to Dan Snyder who acquired the company in a proxy fight several years ago, other major equity wipe outs include Bill Gates and Jim Simons, whose Cascade Investments and RenTec funds, own 11.1% and 5.5% of the already worthless stock (page 5 of the Voluntary Petition below). We highly doubt this event will dent the latter's relationship with its PBs JPM and DB as they continue aspiring to new heights in purchasing every imaginable share of SPY and IWM available.

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Six Flags' Fate Rests With Fidelity's $100 Million Bonds

The Washington Post out with a good expose on the non roller coaster-based freefall for Dan Snyder's Six Flags.

The firm, which announced last week that its stock was being delisted from the New York Stock Exchange, faces a more than $300 million payment to preferred stockholders in August that the company says it cannot afford. Fitch Ratings recently warned that a "default is imminent or inevitable." Its shares ended the week worth 26.6 cents.

Six Flags' debt troubles threaten to overwhelm the 48-year-old firm just as financial analysts and theme park reviewers say that Snyder's management team, which includes several former top ESPN executives, has largely turned around operations at the company's theme parks. Revenue was up 5 percent last year, even as the economy waned and gas prices soared through the summer. Attendance increased 2 percent.

But despite a turnaround in operations, Six Flags still needs to clear up more than $2 billion of long-term debt incurred by the firm's previous owners. And Six Flags chief executive Mark Shapiro knows that all too well. "We can't operate with this noose around our neck," he said the other day, walking around Six Flags America in Upper Marlboro as it prepared to open for spring break. "We need to resolve our balance sheet one way or another."

Easier said than done though: there is one party that can stall the entire process, leaving no other option for SIX than to file. The culprit: otherwise docile and benign mutual fund Fidelity, which in this case is enough of a vulture to make the Drexel guys of the 80's seem meek by comparison.

Six Flags officials said that nearly all of the bondholders support a debt-for-equity swap. That is, all but one. Six Flags executives have not publicly identified the holdout, but people with knowledge of the negotiations say that a Fidelity Investments fund owning more than $100 million in bonds due in 2010 has yet to come to the bargaining table -- a situation that if not resolved could force Six Flags into bankruptcy.

Why the stubborn approach? Mike Simonton of Fitch chimes in: "the holdout may be considering three scenarios. One is that Six Flags, which ended 2008 with $210 million in cash, will have enough cash to pay the more than $100 million in bonds that come due in 2010. Another scenario is that the bondholder has a credit-default swap -- essentially an insurance policy -- that would pay it a higher sum than an out-of-court agreement. Finally, Simonton said, the bondholder might think that a bankruptcy reorganization would be a better solution to the equity deal Shapiro is offering."

As Snyder points out, lately SIX has seen an operational pick up. How much of that is due to unemployed teenagers gawking and kibitzing at the various parks is debatable (and subject to verification: nothing like a diligence excuse to hit up the nearest Six Flags... if nothing, then to at least check if the price of hot dogs and coke is still stratospheric). But the article does bring up the point which Zero keeps harping on: how CDS holders have the potential to stall even the most determined out-of-court negotiations due to the asymmetric payoffs in the case of a chapter 11, although there are certain loopholes to this which SIX seems to be unaware of.

In the meantime, Six Flags is leaving little to chance, having hired financial restructuring advisors HLHZ. Ultimately, we hope Six and Fidelity finally get past talking to each others' secretaries and resolve this issue, as depriving the masses of unemployed Americans out of one their last enjoyable pastimes could escalate into civil unrest much more rapidly than any of the other red flashing signs that the economy is headed for total collapse with the blessings of a select few. Sphere: Related Content

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Yet Another Six Flags Update

More news on Six Flags, some good some not so good... First, I reprint what Six Flags PR department would like ZH's readers to know, so we present that with no comment:

Dear Tyler,

I hope this email finds you doing well this afternoon, here is another update for you.

I know you and your readers have been following news about Six Flags recently and I wanted to make sure you had the opportunity to listen in on our Q4 2008 earnings call this morning. If you missed the call , here is a link to the webcast http://investors.sixflags.com/phoenix.zhtml?c=61629&p=irol-calendarpast which will be archived for the next few months.

Important items discussed by our CEO and CFO during the call:

• By every measure, 2008 was the best year in the history of Six Flags.
• Our company achieved every key objective established in the three-year turnaround plan, including improving the parks, achieving positive cash flow for the first time, and generating revenue of approximately $59 million in 2008.
• 2008 revenue represented an increase of 53% over the previous year.

I know you have followed reports regarding Six Flag’s balance sheet issues, and the call addressed that issue as well. With more than $200 million cash on hand, the back-office financial restructuring issues will be invisible to guests visiting our parks this season. What guests will see when they go to Six Flags will be new rides and attractions; a friendly, well-trained staff; and lots of opportunities for a great day of family fun. With longer hours, longer seasons, and new low prices, 2009 should be another incredible year.

Please let me know if you have any questions about the earnings call or Six Flags in general.

[edited out]
Six Flags Inc.

I appreciate Six Flags' view.

The not so good news come out via abcnews.com, in a piece titled "Six Flags CEO Says Debt holder Won't Talk."

A key holder of Six Flags Inc.'s debt is holding up negotiations to restructure the debt, the company's president and chief executive told investors Monday.

CEO Mark Shapiro did not name the debt holder, which he said holds a "significant amount" of the company's senior notes due in 2010. But he said it "has refused to meet" to renegotiate the debt.

"The auto companies have an easier time getting a meeting with the United Auto Workers than I do of getting a meeting with this particular portfolio fund manager," Shapiro said.

The New York-based company said in its annual report last week that a Chapter 11 filing is possible if it doesn't restructure its debt.

The company's first looming obligation is to holders of its preferred income redeemable shares, or PIERS, which will be due more than $300 million when the shares mature on Aug. 15.

Six Flags has said it does not expect to have enough cash to meet that obligation.

"We simply can't refinance our debt with the markets being what they are and we can't sell excess real estate in this environment and expect to get something even close to full value," Shapiro said.

Shapiro disclosed that the company has retained investment banking firm Houlihan Lokey financial advisers to help restructure the company's balance sheet to reduce debt and expects any out-of-court solution to include a "significant debt-for-equity exchange."

Shapiro said restructuring debt — in court or outside — will not affect the experience visitors have at its theme parks and the company plans a "heavy advertising and communications blitz" to get that message to the public.

We hope this "particular bond manager" (how's Boston these days?) comes to his senses and realizes that bored teenagers throughout the country need their zero G dives, wooden rollercoasters and not so cheap hot dogs and soda beverages to pass the time without the distraction of a potential looming bankruptcy filing. So next time you get a call from 212-652-9xxx please pick up the phone.

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Six Flags Retorts

As Zero Hedge prides itself on its objective pessimism, I wanted to bring to your attention an email received from the PR department at Six Flags in response to ZH's post from Friday, commenting on the company's long-term prospects, especially in light of recent market levels of SIX's publicly traded securities.

Dear Tyler,

In case you may have missed it, I thought you would like to see the story below and linked here <http://www.nytimes.com/2009/03/14/business/14flags.html?_r=1&scp=2&sq=Six%20Flags&st=cse> from Saturday’s New York Times, which puts into context the story about the Six Flags debt restructuring.

I thought it important for your readers to know that the restructuring, while serious business, in no way affects our daily operations. Companies like ours all over the United States are restructuring their debt and keeping their doors open. In fact, we’re actually in better shape than many other companies that continue to operate through the process. Last year, for example, our revenue went up five percent to $1 billion and our operating income grew to $144 million.

We’ve got more than $200 million set aside for operations, we’re hiring full staff at all of our parks and we’re planning some bigger attractions this year than ever before, so our guests can expect to have great experiences again at our parks in 2009. As our CEO Mark Shapiro has said, the restructuring is a “back-of-the-house” issue that won’t affect our ongoing service to guests.

Please feel free to contact me if you have questions or need more information.

Sincerely,

[Edited out]

Six Flags Inc.

As the author of Zero Hedge has often been accused of having the intellectual capacity and emotional maturity of an angry, nihilistic, chain-smoking teenager, and personifying himself as such, he is fully aware of the niche that Six Flags fulfills in the entertainment industry and thus hopes that the company's "back of the house" restructuring issue is promptly resolved and thrill seekers continue enjoying hydraulically launched, magnetically accelerated roller coasters all the while sipping on $15 cups of diet coke. Sphere: Related Content

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Six Flags Preparing For Bankruptcy

The last time we wrote about amusement park operator Six Flags it was on defibrillator alert. WSJ has come out with a report in which CFO Jeff Speed confirms he has hired bankruptcy law firm and financial advisors Paul Hastings and Houlihan Lokey. Speed states that he is hoping (against hope) to arrange a consensual plan with creditors ahead of an August deadline for $319 million in equity payments. Of course a chapter 11 in SIX will have marginal impact to the 3 or so left shareholders in SIX stock which was last trading at $0.17/share. Six Flags bonds are also trading at abysmal levels, with the '13 and '14 maturities both Tracing in the low teens. Sphere: Related Content

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