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For Six Flags, Debt Squeeze Looms as Latest Hurdle

By Alejandro Lazo
Washington Post Staff Writer
Friday, March 13, 2009

When Washington Redskins owner Daniel Snyder became chairman of the troubled Six Flags theme park company three years ago, he sought to turn the debt-laden firm into a piece of a burgeoning entertainment empire.

Now the home of adrenaline-pumping attractions such as Tony Hawk's Halfpipe, the Tornado and the Tower of Doom could sink under its own weight. The company said Wednesday that it may seek bankruptcy court protection if it can't restructure some of its obligations by mid-August and that it is actively negotiating with lenders.

As part of its attempted turnaround, the company has tried to make its parks cleaner and more family-oriented. The company owns 20 amusement parks, including Six Flags America in Largo.

The strategy has been orchestrated by president and chief executive Mark Shapiro, a former ESPN programming chief who Snyder recruited to run the company after he won a proxy battle in 2005.

"The three-year turnaround for Six Flags required a great deal of patience," Shapiro said in a statement on Tuesday. "The remaining challenge is the inherited balance sheet and we are in comprehensive dialogue with our lenders to remedy that issue."

A spokeswoman for the company, Sandra Daniels, said yesterday that a bankruptcy filing would not disrupt park operations. "Whatever the end result is of our discussions . . . Six Flags is open for business," she said.

Six Flags' warning that it might turn to bankruptcy court came after its announcement that last year it lost $113 million, compared with $253 million in 2007, as attendance at its parks nudged up despite the economy. Its loss for the fourth quarter, however, widened to $201 million from $127 million in the fourth quarter of 2007.

Snyder's effort to transform Six Flags was part of a broader expansion into a variety of entertainment properties. In the first few months after the takeover, investors cheered the move, with Six Flags shares climbing as high as $11.80, up from about $4 before the proxy fight.

One of Snyder's private equity firms, Red Zone Capital, in 2007 bought Johnny Rockets, the restaurant chain known for its 1950s-themed diners, then added those restaurants to the Six Flags parks. The company also bought Dick Clark Productions, the television home of the Golden Globe Awards, the Academy of Country Music Awards and "American Bandstand," hoping to feature some of those in the parks. A spokesman for Snyder referred calls to Six Flags.

Concerns over the future of Six Flags have grown. In September, Moody's Investors Service downgraded its rating, citing the possibility that it could fail to meet its obligations. In October, the New York Stock Exchange warned the company twice that it was not in compliance with listing standards, first because its share price had sunk below $1 and later because its stockholders equity had fallen to less than $75 million. The stock remains listed, however. It closed at 19 cents yesterday.

Six Flags' debt payments continue to weigh down its earnings. Most pressing now is an Aug. 15 deadline in which the company must pay $287.5 million to owners of its Preferred Income Equity Redeemable Shares. That could run to more than $318 million when accrued and unpaid dividends are factored in, according to the company's annual report filed with the Securities and Exchange Commission.

"It is a good business with a bad balance sheet; what we have seen is that, surprisingly, they have held up relatively well given what is going on in the economy," said Christopher Snow, an analyst with the firm CreditSights. But in regards to their upcoming debt deadline, he said, "they have to come to some resolution."

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