Six Flags at Half-Staff

The money will keep coming in for Six Flags (OTC BB: SIXF.OB), as its turnstiles continue to click. The same can't be said for its common shareholders, after the regional amusement-park chain filed for Chapter 11 bankruptcy reorganization over the weekend.

Not that investors should feel blindsided. The company has $2.3 billion in debt and had been delaying interest payments, as it tried to persuade its creditors to swap debt for equity. The stock was delisted from the New York Stock Exchange two months ago.

Six Flags generated $144 million in operating profits last year, a dramatic improvement over its 2007 performance. It was able to grow attendance and revenue per patron, while trimming away at its operating costs. However, even $144 million isn't enough to cover the $176.2 million in interest expense incurred as a result of the company's tragic mountain of debt.

Yes, Cedar Fair (NYSE: FUN  ) has been able to turn a profit with a similar debt load. But Six Flags faces a long road ahead, even though its financial performance has been improving. Even selling off smaller parks didn't make a material dent in the company's borrowings. Now it will hope to re-emerge as a stronger player with a cleaner balance sheet.

The timing of its bankruptcy filing definitely stinks. Just as consumers, fearing the worst, may flock to Ford (NYSE: F  ) cars during the General Motors bankruptcy, Six Flags has to be careful that it doesn't lose potential patrons to Cedar Fair, Disney (NYSE: DIS  ) , or Blackstone Group (NYSE: BX  ) parks. Since it's a regional amusement park with mostly local customers, the competition's parks aren't necessarily nearby. Still, the individual parks may suffer a slowdown in season pass sales, and maybe even group sales, as a result of thrill-seeking consumers who don't know the difference between Chapter 7 and Chapter 11 bankruptcies.

In short, this would have gone down a lot easier if it had taken place after the telltale summer season. Another year of improvement may have even won over some of the creditors without the likely wipeout of its common-stock investors. Unfortunately, there's not a lot of flexibility when you can't pay the bills.

Other ways to throw up your hands and enjoy the ride:

Disney is a recommendation for Motley Fool Stock Advisor and Inside Value subscribers. Take a ride on any of our stock research services with a 30-day pass in the form of a trial subscription offer. Hands up!

Longtime Fool contributor Rick Munarriz loves hitting amusement parks this time of year. He visited four last week alone. Rick owns shares of Disney and Six Flags and units of Cedar Fair, and he's also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (8)

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  • Report this Comment On June 15, 2009, at 2:56 PM, phalkor wrote:

    Season pass sales are the reason Six Flags fell down a black hole. It's called "giving away the gate". In many cases the season passes were only about 30% more than a single day ticket. This resulted in the parks becoming day care centers for the 12-16 crowd. This crowd also spends very little in park w/o mommy or daddy's wallet. For an amusement park to succeed they need to avoid succumbing to the temptation of the lowest common denominator.

    Six Flags also sucks mightily.

  • Report this Comment On June 15, 2009, at 6:39 PM, plange01 wrote:

    a bankruptcy that obama did not cause!!

  • Report this Comment On July 23, 2009, at 4:22 PM, zeroflags wrote:

    I just returned from six flags in NJ. (07/2009) I will never go there again. I am requesting a refund. My family had the worst experience at this park. People were cutting lines with no way to stop them. This happened on almost every ride. A lot of rides were closed. There is no visible management overseeing the running of the park. One of the gates to a ride nearly crushed my son’s hand as it slammed shut. They promote that you can bring your own food and eat it in a picnic area, however there are only 6 tables in this area to accommodate thousands of guests. We had to eat on the rock covered ground making a sandwich in our hands. The park is so poorly run and has a bad element running through the park with no visible security we the patrons can go to if needed. The people ( teens ) running the rides seemed to want to keep it going fast that safety was sacrificed. We did not feel safe at all. We had a horrible time and left so mad. My son is 12 years old and he wanted to leave the park early. There is nothing like waiting an hour and a half on line to be cut again and again. Also, they are checking for weapons coming into the park, but when you get a stamp and re-enter they do not check. Makes no sense to us. Water was almost 4 dollars a bottle. Food prices were so high as well. They charge almost the same price for fast pass as a regular ticket. Fast pass is nothing like Disney ( free at Disney ). You have to pay extra for some rides. They are having money issues and we the patrons are paying for it. Shame on you six flags it was really a no flags day for us.

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