By Thomas Heath
Washington Post Staff Writer
Sunday, June 14, 2009
Theme park operator Six Flags, chaired by Washington Redskins owner Daniel M. Snyder, declared bankruptcy yesterday after failing to reach a deal with lenders on $2.4 billion in debt.
The bankruptcy is likely to significantly reduce the value of the shares held by Snyder and others in the chain, whose 20 parks span North America and drew 25 million visitors last year. In a statement on the company's Web site, chief executive Mark Shapiro, whom Snyder recruited to run Six Flags, said the theme parks will remain open and employees will continue to be paid.
"This action to clean up the balance sheet paves the way for a full revival of the company," Shapiro said. "We inherited an unsustainable $2.4 billion debt load from the previous management team." Six Flags said it filed Chapter 11 with a prearranged reorganization plan to reduce its balance sheet by about $1.8 billion and eliminate more than $300 million in preferred stock obligations due this summer.
Snyder, whose stake in the company is roughly 5 to 6 percent, and who has seen the value of his shares decline precipitously in recent years, released a statement yesterday backing Shapiro.
"Mark and his team have exceeded every operational goal we set out three years ago, and Six Flags is on the path to maintaining its growth and continuing to satisfy millions of guests," Snyder said. "The harsh realities of today's credit markets and the onerous debt we inherited from previous management have brought us to this place, but I'm confident Six Flags will emerge as a stronger corporation."
Shapiro said that "when the reorganization process is finished, you will see Dan Snyder making a significant investment in Six Flags."
The bankruptcy for the 48-year-old firm follows a wild ride in recent years. Snyder took control of the company after a bitter proxy fight in 2005. He brought in the energetic Shapiro from ESPN to resurrect it.
Shapiro's strategy was to remake Six Flags into a more wholesome, family-oriented experience, emphasizing safety, cleanliness and customer service while forging partnerships with major sponsors such as Sara Lee and Chase Card Services.
The company doubled its income from corporate sponsorship and from season ticket sales, and it added themed attractions based on the Looney Tunes characters, the Justice League of America, skateboarding legend Tony Hawk, the Wiggles and Thomas the Tank Engine.
But its summer 2007 attendance was slammed by bad weather in Georgia and Texas, and by an accident on a ride at its park in Kentucky. The same year, it sold seven of its theme parks to a Jacksonville, Fla., company for $312 million in an effort to improve its balance sheet.
Six Flags slashed admission prices by half at several parks to improve attendance and cut a deal in 2008 with a Dubai developer to build a theme park in the Arab emirate as part of a huge entertainment complex. Despite improvement in operations and attendance, the company could not get out from under its interest expense of $175 million a year, which ate up a big chunk of earnings.
The recession made it difficult for Six Flags to refinance its obligations or to sell more properties.
Last summer, it said it would no longer pay a dividend to holders of certain preferred shares for the second consecutive quarter. The company was recently delisted from the New York Stock Exchange.
Six Flags shares traded Friday for 26 cents.
Other major investors in Six Flags include Bill Gates' Cascade Investment and the hedge fund Renaissance Technologies.