Please ensure Javascript is enabled for purposes of website accessibility

Six Flags at Half-Staff

By Rick Munarriz - Updated Apr 6, 2017 at 1:53AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The regional amusement-park operator files for bankruptcy reorganization.

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:

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$108.64 (3.29%) $3.46
Ford Motor Company Stock Quote
Ford Motor Company
F
$13.53 (3.68%) $0.48
The Blackstone Group L.P. Stock Quote
The Blackstone Group L.P.
BX
Cedar Fair, L.P. Stock Quote
Cedar Fair, L.P.
FUN
$47.09 (3.06%) $1.40

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
338%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.