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Six Flags CEO Mark Shapiro says the company won't close parks or layoff employees. But, without a ruling from the court, he can't make any promises.
The ride for Six Flags' (SIXF, news, msgs) shareholders is over. The theme-park operator filed for bankruptcy on Saturday, June 13, after failing to keep up with payments on $2.37 billion in debt.The Chapter 11 announcement came as little shock to Wall Street, which had long factored the likelihood of bankruptcy into the price of insuring Six Flags' debts. The company, which lost nearly $113 million last year, had visibly struggled to raise money in advance of an Aug. 15 deadline to pay preferred income shareholders $287.5 million, plus another $31.3 million in accrued and unpaid dividends. Failure to meet the deadline would have triggered clauses in other creditor contracts demanding early payments.
"The current management team inherited a $2.4 billion debt load that cannot be sustained, particularly in these challenging financial markets," said Six Flags President and CEO Mark Shapiro, in a statement.
Shapiro has promised that the filing will not impact operations at the companies' 20 theme parks, which include more than 120 roller coasters such as Kingda Ka, the tallest roller coaster in the world. The company owns 18 Six Flags parks in the U.S. and an additional two in Mexico and Canada, according to its bankruptcy affidavit, provided by BankruptcyData.com. It also has plans for a park in Dubai and Qatar, both major tourist destinations in the Middle East.
No layoffs?
Shapiro has also promised Six Flags will not have layoffs. The company employs about 2,040 people as well as another 28,500 seasonal employees during the parks' warm-weather months when the parks are open.
"Our brand and out operations are on solid ground," said Shapiro in a statement. "This process is strictly a financial restructuring of our debt. We are fully committed to ensuring that the experience of our guests this summer is totally unaffected by this restructuring process."
Of course, Shapiro really can't guarantee that. Though the company has pre-negotiated terms with debt holders to erase about $1.8 billion in debt and an additional $300 million in preferred shareholder obligations, the bankruptcy court has not approved the plan.
The company has already sold – and tried to sell – subsidiary parks to other operators. In 2007, the company sold its stake in three water parks and four theme parks. The sale included Houston's SplashTown and the Enchanted Village near Seattle. Six Flags was also reportedly trying to sell the property rights to its New Orleans theme park, which was largely destroyed during Hurricane Katrina in August. 2005. The park is currently closed.
Despite his public statements, Shapiro acknowledged that Six Flags may have to let employees go or shed operations in the affidavit accompanying the bankruptcy filing. "In the event that terminations are necessary," Shapiro wrote, full-time employees will receive "one week of pay per year of service in severance payments" up to $10,950. However, he added that the company does not anticipate that it will need to reduce its work force or, as a result, pay severance.
