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Six Flags Bankruptcy Filing Likely to Wipe Out Shareholders

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By Thomas Heath
Washington Post Staff Writer
Tuesday, June 16, 2009

Washington Redskins owner Daniel M. Snyder and other Six Flags shareholders, including Bill Gates's Cascade Investment, are likely to see their shares wiped out as a result of the theme park chain filing for Chapter 11 bankruptcy protection over the weekend, according to a bankruptcy expert.

Snyder has chaired the company since winning a proxy fight with Gates's support in 2005, and he owns about 6 percent of the shares. Those shares are likely to be worthless as the company pays off more senior creditors in anticipation of issuing new shares.

"The stockholders will likely not get anything," said David Skeel, who teaches bankruptcy at the University of Pennsylvania Law School.

The 48-year-old Six Flags is reeling under the interest payments on $2.4 billion in debt. It is attempting to reduce that total by about $1.8 billion and eliminate more than $300 million in preferred stock payments due in August. The company has already reached some preliminary agreements with lenders in anticipation of a bankruptcy filing.

In filings yesterday with the Securities and Exchange Commission, Six Flags said $600 million of existing bank debt will remain as a debt obligation after the bankruptcy concludes, with the rest of the bank debt converted into new common stock. The company is seeking a $150 million credit line from lenders to provide liquidity when it comes out of bankruptcy, which is expected to last up to six months.

The company plans to issue new common stock as part of its restructuring, according to the filing. And it wants to keep much of its management team in place.

Snyder will remain as chairman and Dwight Schar, chairman of Reston-based homebuilder NVR, also intends to stay on the board, according to the filing.

A spokesman for Snyder referred questions to Six Flags.

Six Flags President Mark Shapiro said his management team signed four-year contract extensions in March. He said the company's lenders are seeking representation on the board of directors. The new board will have 11 members, seven selected by lenders, according to the filing.

"We are clearly receptive to that," Shapiro said. "They have equity, so they will want to have input."

Fitch Ratings yesterday reduced the company's debt rating from 'C' to 'D,' which is Fitch's lowest rating.

"We expect the equity to get cancelled," said Mike Simonton, senior director at Fitch Ratings. "The new stock will predominantly be held by lenders."


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