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Six Flags to be taken over by junior bondholders in settlement

March 20, 2010|Bloomberg News

Six Flags Inc. junior bondholders are expected to own the operator of Magic Mountain and other theme parks under a settlement reached Friday, ending a two-week bankruptcy trial.

Company attorney Paul Harner announced the deal in U.S. Bankruptcy Court in Wilmington, Del., after a trial related to the now-defunct reorganization plan was halted so Six Flags and two competing groups of bondholders could negotiate.

"Rather than argue in court, we decided to put our money where our mouth is," said attorney Tom Lauria, who represents the junior bondholders. That group was led by hedge fund manager Stark Investments.

Under the plan, the junior bondholders, who are owed about $896 million, would put as much as $725 million into Six Flags by buying new stock that the company would issue, Harner and Lauria said.

That pool of cash, along with a new series of loans, would be used to help pay off a competing group of senior bondholders owed about $420 million and the company's lenders, who are owed about $1.1 billion.

Six Flags, based in New York, filed for bankruptcy protection in June with plans to cut debt by $1.8 billion. When it exits bankruptcy, it will have debt of about $1.1 billion, Harner said.

The proposed settlement must be approved by U.S. Bankruptcy Judge Christopher Sontchi.

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