Will This Summer Be Six Flags' Last Ride?

| About: Six Flags (SIX)

I started following the soon to be doomed park operator after a trip there last year. Since a recent Hershey Park vacation, I am even more convinced they are done. After large shareholders began selling and management began blaming god for poor results, I couldn't wait for the latest excuse. Fortunately, you really only need to wait a quarter.

At least the company has begun to attempt some honesty with shareholders. Although, it still is blowing smoke up investors'...well...

Dealscape Reports:

The second-largest U.S. amusement park company, Six Flags Inc. (NYSE:SIX), has been on a downhill ride over the last decade with its latest twist, a downgrade to selective default from CCC+ by Standard & Poor's.

The move highlights the financial woes Six Flags has been suffering as the company has been hit hard by the slowing economy, particularly impacted by the rising price of gas, and intense competition from other forms of entertainment. The company has tried to save money with its recent move of exchanging $530.6 million in notes due in 2010, 2013 and 2014 for $400 million in bonds maturing in 2016, resulting in a net savings of $130 million. Additionally, the company has divested and closed some of its properties to free up more cash.

Despite these measures, Six Flags has not been able to stop the trend of losing money every year since 1998, plagued with a massive debt load of more than $2 billion due to overexpansion. With all the financial pressures that Six Flags has been experiencing, the only remedy for the theme park operator may be a merger with a stronger partner. However, when rival Cedar Fair Entertainment Co. (NYSE:FUN) tested the M&A waters last year, it found no takers. So Six Flags' ride may end in bankruptcy.

Six Flags is the only company I have ever seen that has a debt level ($2.3 billion) that is 14 times larger than it market cap ($160 million). Stunning....

Good news is that at $1.60 a share, you can skip a soda at the park and pick up three shares for the cost of the soda. Although, the soda at least will give you some enjoyment.

I do not buy the recent excuse du jour, gas prices. If anything, the regional parks ought to benefit as people will not travel long distances for vacations but seem more likely to do the day trip that is Six Flags. Witness this report.

What is the problem? Simple really. A lousy experience that lacks any value. Until that changes, expect nothing but more excuses, until the end, which may not be much longer.

Disclosure: None