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Six Flags at risk for bankruptcy

March 12, 2009|Nathan Olivarez-Giles

Six Flags Inc., which owns Magic Mountain in Valencia and 19 other theme parks, said Wednesday that it might need to file for Bankruptcy Court protection if the company can't restructure its debt by mid-August.

An overhaul of Six Flags' debt is highly uncertain, the New York-based company said in a regulatory filing, causing auditor KPMG to have significant doubt about the theme park company's ability to continue as a going concern.

At the center of its financial worries is an Aug. 15 deadline to pay $287.5 million to owners of Six Flags' Preferred Income Equity Redeemable Shares, the company said in its annual report filed with the Securities and Exchange Commission. The payout to preferred stockholders could run more than $318 million when accrued and unpaid dividends are factored in, the filing said.

"Given the current negative conditions in the economy generally and the credit markets in particular, there is substantial uncertainty that we will be able to effect a refinancing" of the preferred stock and other debt before their maturity dates, Six Flags said in the filing.

Six Flags may file for a pre-packaged Chapter 11 bankruptcy if the company can't renegotiate the terms of its PIERS debt by Aug. 15, the filing said. Such a move would take place "well in advance of" the preferred stock's due date. Chapter 11 of the U.S. Bankruptcy Code allows a company to continue operating while it works out a plan to pay its creditors.

If a renegotiation of the PIERS terms isn't reached in time, a domino effect could take place, causing a cross-default on Six Flags' other debts, which could force the company into bankruptcy, the SEC filing said.

News of the filing came after regular stock trading had ended for the day. Six Flags, which closed at 20 cents a share, fell as low as 18 cents in after-hours electronic trading Wednesday.


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