Six Flags may be forced to file chapter 11 bankruptcy if it cannot find a way to renegotiate its debt. While operations have finally turned around, Six Flags’ lingering debt from years of negative income has finally seemed to catch up with them. The biggest issue is the upcoming redemption of its’ preferred PIERS stock. I for one would gladly accept well under the proposed rebuy price of $25 / share if it means Six Flags can get back into the black without filing bankruptcy.
In a recent filing with the SEC, Six Flags stated:
We have had a history of net losses. Our net losses are principally attributable to insufficient revenue to cover our relatively high percentage of fixed costs, including the interest costs on our debt and our depreciation expense. We also have an accumulated stockholders’ deficit of $443.8 million at December 31, 2008. Additionally, our Preferred Income Equity Redeemable Shares (“PIERS”) are required to be redeemed in August 2009, at which time we are required to redeem all of the PIERS for cash at 100% of the liquidation preference ($287.5 million), plus accrued and unpaid dividends ($31.3 million assuming dividends are accrued and not paid through the mandatory redemption date). 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 our debt on or prior to maturity or the PIERS prior to their mandatory redemption date on August 15, 2009.
..Accordingly, we have stated in our financial statements included herein that there is substantial doubt about our ability to continue as a going concern unless a successful restructuring occurs.
…We may be compelled to seek an in-court solution in the form of a pre-packaged or pre-arranged filing under Title 11 of the United States Code, 11 U.S.C. §§ 101, et seq., as amended (“Chapter 11″) if we are unable to successfully negotiate a timely out-of-court restructuring agreement with the PIERS holders, common stockholders and our creditors.
I guess we will have to stay tuned. Six Flags stock price is now trading around $.20 with PIERS up around $.60.
