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Six Flags says there is 'substantial doubt' the chain will survive

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Published: March 11, 2009 at 8:24 PM

Six Flags today told the U.S. Securities and Exchange Commission, in essence, if we can't restructure our debt before we have to make more than $300 million in payments this summer, we're going bankrupt.

Here are the notable quotes from Six Flags' most recent 10-Q statement, filed on the SEC website:

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. ยงยง 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.

In English, that means bankruptcy. 'Cause at this point, with all the nation's major banks essentially insolvent, Six Flags has about as much chance of refinancing as you do winning one of those big stuffed animals with a single coin toss on a Six Flags midway.

Scratch that, your chances of landing the four-foot Tweety Bird are better.

Readers' Opinions

From Anthony Murphy on March 11, 2009 at 8:28 PM
I got my Season Pass :(
From Raul Araoz on March 11, 2009 at 8:38 PM
So it begins...
From Ben James on March 11, 2009 at 8:38 PM
So, I guess the real question is, will Six Flags become the next HRP?

I too already bought my season pass for this year and it was on the basis that I could take a trip up north the Great America in Chicago.

I would rather they shed smaller parks (excluding St. Louis) to survive than to dump the chain entirely. We don't need a bunch of New Orleans Parks around the country.

From Robert Niles on March 11, 2009 at 8:39 PM
Again, as we were talking about early this week (regarding Worlds of Fun), the story's the same - profitable individual businesses being brought down by corporate debt amassed during go-go-bubble times as a chain expanded beyond its means.

Six Flags has some good parks. I like what some of their managers are doing to improve their parks and turn around the chain's old reputation for poor service. But they can't get the capital they need to finish the job because of this debt. And now, the chain itself might not survive, throwing the survival of some of these good parks in jeopardy.

This is how unregulated financial markets die, folks. They don't just take out the weak and foolish (e.g. Premier Parks, Dan Snyder for taking over the chain rather letting Premier management go to bankruptcy court and buying the best assets there). They take out good, solid businesses, too (potentially SF Magic Mountain, SFGrAdv and SFGrAm).

From Anthony Murphy on March 11, 2009 at 9:29 PM
Yeah, SFGA has gone from one of those parks that used to be known as having terrible service in the 80s and 90s into a thriving, and I am guessing, profitable park. It would be terrible to see it go since its been in its current location for 33 years.

What is also terrible about if SFGA closes its doors is all the business around it. SFGA has really changed Gurnee very similar for what Disney did for Orlando. The area has become a short vacation destination for the area with quality hotels and resturants springing up in the early 2000s. The other big destination in the area is Gurnee Mills which is just a giant mall.


I predict that SFGA and the other strong parks will be sold off rather than closed down. Great America is actually making a new attraction at the moment and appears to be one of the few businesses that can hire a ton of people. I am not sure what the other Six Flags Parks did, but at SFGA, everybody paid kids price plus discounts via soda cans or buying online/supermarket. It looks like SFGA saw the economy tanking before the other theme park companies.

From Robert Niles on March 11, 2009 at 9:45 PM
As with many of these cases, I think the worst thing that could happen, from the consumers' point of view, is a long restructuring period. All that will accomplish is the gutting of guest service, upkeep and capital expansion at the parks, leaving even the strong ones in a severely weakened state, as the company tries to cut every cost to make its restructured debt payments.

The best option, for the consumer, is swift liquidation. Sell the best parks, while they are still strong, to other operators. Let the poorly performing ones die. If played well, we can end up with a new, stronger "Six Flags," with just the best parks and without the cripping debt. And with the best park managers still in place.

From Scottland Jacobson on March 11, 2009 at 9:48 PM
This is such a bummer, but not unexpected. I have my season pass as well and I'm planning on hitting SF America in Baltimore for the first time in May. May I beat the bankruptcy!!
From Joshua Counsil on March 11, 2009 at 10:24 PM
Damn. That's all I have to say.
From James Rao on March 12, 2009 at 3:52 AM
And to think...Six Flags actually had revenue and attendance increases in 2008.

I am in agreement with the obvious solution: SF needs to sell off everything but its premiere destinations (i.e., Magic Mt, Fiesta Texas, Great America, Great Adventure, and one or two others) and pay off their debts. If they just keep the cream of the Six Flags crop they might be able to stay solvent...and even continue to improve.

But who would want to buy their lesser parks? And honestly, who is even in the market these days?

Man, I wish I had about $100 million just laying around as this would be a great (and inexpensive) year to become a theme park owner!

From Derek Potter on March 12, 2009 at 5:25 AM
Bad news for Six Flags, although to tell you the truth, it's not over yet. Fixing this problem isn't about getting the money. It's about getting either A) an extension, or B) a restructuring. There are ways to fix this problem, and I'm sure that Six Flags isn't the first company that's been down this road.

They just reported a profit and attendance increase for 2008, and by most accounts I've heard, seem to be turning things around inside the park. That's something for investors to think about, because if they can't get an extension or reach an agreement with PIERS holders, than they likely go to bankruptcy court, which means the shareholders probably get nothing (see Circuit City..among other companies). If I were holding those shares, I would think about giving them a little more time to fix things.

The best course of action for Six Flags? Have a good year and make some money. They operate in several of the largest markets in the country, and amusement parks will be seen as a cost effective alternative to spending thousands on a vacation. They have the ability to be successful, and doing well in the face of the economy will help make their case to the investors to give them time. It still could be a tough sell, given the fact that most people in the stock market (and the people reporting on it) seem to be acting like there is a bat in the room.

Recently I feel a little like Kevin Bacon at the end of Animal House, when he's trying to control a chaotic crowd running for no real reason and yelling "REMAIN CALM...ALL IS WELL!". It seems that the general reaction to these chaotic times is to panic, cut, and run. I'll tell you this much, we, the Dow, the banks...etc... would be a lot better off if people would keep their cool a little more with the stock market and such. A free market relies on level headed people who don't panic, and unfortunately it seems we are lacking in that department. Parks aren't going to be on easy street this year, but the season hasn't even started and people are pretty much writing it off as a failure. Pessimism isn't exactly the best way to get off the ground.

From Don Neal on March 12, 2009 at 6:58 AM
That's too bad. Although Dan Snyder's business practices were going to bring him to this point eventually. But I guess if 2008 was profitable and people are seeing changes then something must be going right. I have only seen the crappy SF parks so I don't have much stake in the game. But I hope they figure something out just for the sake of the Inustry as a whole.
From Chris Danger on March 12, 2009 at 12:01 PM
Im in agreement with alot of folks on here, the "core 4" parks(SFoT/SFoG/SFFT/SFMM) should be kept, as they are known regional economic generators for their areas. The other properties (Small Regionals, Foreign, Side Businesses) should be sold off ASAP. If worse comes to worse, I have a feeling
From Robert Niles on March 12, 2009 at 12:17 PM
Going by attendance, Great America and Great Adventure are the two most popular Six Flags parks. Magic Mountain is next on that list. So there are your top three Six Flags parks. Add the chain's three original parks in Texas, Georgia and St. Louis, and you have... six parks for Six Flags. Works for me. (Though I can envision an argument to dump St. Louis for New England.)
From Anthony Murphy on March 12, 2009 at 1:41 PM
Six sound like a reasonable number, but I feel bad for the ones that close down.

Funny you should mention those six parks since during Walk in the Parks, the five mentioned were in the top 6! (one of the TX parks was combined with another). Since 12 participated in the Walk in the Parks event, thats the top half! But its true, Six Flags does help the areas around it from what I can see.

If I were to cut two (sorry!) It would be Kentucky Kingdom and St. Louis.

From Jason Jackson on March 12, 2009 at 1:55 PM
Well at least we know one company that is not going to go after Busch Entertainment...not that there was ever any idea they would!
From Chris Danger on March 12, 2009 at 2:12 PM
I meant to say core six LOL. But yes, I agree totally on a swap for SFSL for either SFNE or SFFT, as both those parks draw a decent amount of people and do well in their respected communities. Im all over that like ACEers at a fried gravy-covered buffet...

Also, do you think SFoT/SFoG has escaped most of the issues of the "parent company" due to their ownership status (i.e. limited partnership).

From Jenna Allen on March 12, 2009 at 3:49 PM
My family recently purchased season passes to Six Flags Discovery Kingdom in Vallejo. In a time when everyone is tightening their belt, we were searching for a way to take family vacations on a minimal budget throughout the year.
The cost per person with the parking pass were a great deal. The additional tickets to the park were the deciding factor for us because we could use them for our daughter's 16th birthday party. (And save even more money!!)

We went for opening day and had the best experience we've had at any venue for several years. Yes I said ANY (and that includes Non Theme Parks). At every corner there were bright faces, asking us how our day was, if we were finding everything all right, if there was anything they could do for us, taking the time to answer our questions about the animals and even letting us play catch with a friendly dolphin! When we returned to our car to head home our thoughts turned to the idea of returning every year for opening day.

I hope that they can find their way out of the financial turmoil. It would be shame to lose such a great institution.

From Robert Niles on March 12, 2009 at 4:56 PM
At the park level, there is some great management within the chain these days, which makes it so sad that the Snyder era was doomed from the beginning due to the debt inherited from the Premier Parks crew. I strongly believe Snyder should have gained control not the way he did, but by using his board influence to force the old management crew into bankruptcy court, where he could have picked up Six Flags' best parks, minus the debt.
From Ben James on March 12, 2009 at 7:40 PM
ALthough I can appreciate the SFNE fans, I feel Six Flags would be nuts to put SFSL on sale. WOF just went up from Cedar Fair and if they can't find a park, I can see it being shuttered to save money.

SFSL should be on the save list. It has come a long way and should be kept on track. If it were to close 3000 people would lose their jobs here. That's on top of the massive layoffs that have already hit St. Louis hard.

From Anthony Murphy on March 12, 2009 at 8:29 PM
They closed tonight on the stock market with .19 a share! Ouch!

There is always a possibility for it all to be sold and closed down because the land they all sit on might be worth alot.

Also, from what I heard, if it all goes down, Six Flags does not have to give refunds for its Season Passes. I doubt that will happen. They probably will stay open.

From 17.255.242.18 on March 13, 2009 at 8:18 AM
I also believe Six Flags should keep their most popular parks. I already believe that the original three are safe (SFOT, SFOG, SFSL). In a nutshell:

KEEP LIST:
Six Flags Magic Mountain
(That park has the potential to give Cedar Point a run for its money.)

Six Flags Great America
(It's probably one of the most successful Six Flags parks ever!)

Six Flags Great Adventure
(It's the largest Six Flags property, with the Drive-Thru Safari, and the world's tallest coaster, Kingda Ka.)

The Great Escape
(One word: COMET!)

Six Flags Mexico
(It's Mexico's largest amusement/theme park.)

SELL LIST:
Six Flags Fiesta Texas

SIx Flags New England

Six Flags New Orleans
(I know they have a contract with the city, but I think that New Orleans should void the contract because that park is a lost cause due to Hurricane Katrina.)

THE JURY'S OUT:
La Ronde
(I don't know about this one.)

From 206.186.240.190 on March 13, 2009 at 11:01 AM
I think bankruptcy is the best move for Six Flags. The amount of debt exceeds the value of the parks. I bet that Six Flags has pledged most of the parks to the creditors, so in the event of bankruptcy, the creditors would move in and take over or sell the parks. Most of the parks will be very profitable if other operaters can pick them up at deep discount prices (like they did for HRP). I would not worry about bankrupty because due to the very nature of these parks, they really can't be closed (the land value is small for most of the parks), but they can be very profitable if run properly and the operator has a reasonable debt level.

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