Six Flags Moves to Restructure, May Sell Some Parks

Six Flags Corp., the owner of Six Flags Magic Mountain in Valencia, said it might have to sell some theme parks or file for bankruptcy protection if can’t keep paying the massive debt it took on when the company was taken private in 1987.

In a filing earlier this month with the Securities and Exchange Commission, Arlington, Tex.-based Six Flags said that if it defaults on its debt payments, it “will be required to refinance its debt, raise equity capital, sell assets or seek the protection of the federal bankruptcy laws.”

The company’s heavy debt load has kept it unprofitable since the buyout. After paying $80 million in interest in 1990, Six Flags posted a net loss last year of $25.7 million, according to the SEC filing. The documents also revealed that at the end of 1990, Six Flags’ total debt outweighed its total assets, giving it a negative net worth of $127 million.

Things might get worse next year. The company also said in the SEC filing that after May 31, 1992, it must pay an additional $42 million a year in interest, after which “funds provided from operations at historical levels will not then be sufficient to meet the company’s debt-service obligations.”

Six Flags was purchased in 1987 by Wesray Capital Corp. in a $610-million leveraged buyout from Bally Manufacturing Corp. Although Six Flags is privately held, the company must file financial reports with the SEC because its junk bonds are publicly registered.

Six Flags is considered a strong competitor in the theme-park business, and attendance at Magic Mountain rose 2% last year to a record 3.2 million people. Record attendance at Six Flags’ seven theme parks pushed revenue to $431 million last year, up 9% from 1989, the SEC filing said. Before interest and taxes, the company earned $55 million.

Company officials sought to downplay the possibility of a bankruptcy filing, characterizing it as the least-likely option but one it had to list in the SEC filing to comply with full-disclosure requirements. “Six Flags has no intention of going into bankruptcy,” Larry Cochran, Six Flags’ chairman, chief executive and president, said in a telephone interview.

Six Flags is currently trying to restructure its debt and is “talking to companies and individuals about bringing more equity into the business,” Cochran said. He declined to identify the possible investors.

Time Warner Corp. owns 31.8% of Six Flags’ common stock and has options to purchase up to 82%. Most of the stake was purchased last year, but Time Warner last month also bought some preferred stock from Bally.

If attempts to restructure Six Flags’ debt and bring in equity investors fail, “then we’ll start talking about the sale of parks,” Cochran said.

Last year, Magic Mountain took in $92 million in revenue, and 1991 is expected to be another record attendance year for the park, the company said. Because Magic Mountain is Six Flags’ most profitable and frequently attended park, said Cochran, “that might make it easy to sell, or we might want to keep it.”

Six Flags’ other parks are located in New Jersey, Illinois, Missouri, Texas and Georgia.

However, Cochran said he foresaw no problems in obtaining additional modifications to the company’s credit agreements with banks that would allow it to continue making its interest payments. Under a recent amendment--the 10th amendment Six Flags has obtained from lenders--the company will remain in compliance with its loan agreements until June 30.

Harrison Price, an attractions industry consultant based in Torrance, said an acquisition of Six Flags is likely. “When a company like that is leveraged out of its skin, and it’s a good company like Six Flags is, somebody with strong hands might pick them up,” Price said.

Meanwhile, at Magic Mountain, Sherrie Bang, Magic Mountain’s vice president of marketing, said: “The refinancing plans of the company are not expected to interrupt the operations of the park in any way.”

Magic Mountain’s new $5-million Psyclone roller coaster, which opened March 23, drove the park to a 24% increase in attendance in the first quarter over the year-ago period, Bang said. The park plans to continue boosting attendance through the addition of new rides, she said.