Will This Summer Be Six Flags' Last Ride?

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. (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. (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

Comments

[Gmel]

Apparently you were not aware of the recent accidents when you wrote this piece. The settlement on this one should be another hit to their feel-good family image.
www.usatoday.com/news/...

[GeorgeBowser Jr]

Todd,
I agree my friend. When Dan Snyder and his investment group, along with the investing arm of Bill Gates, led a management shake-out, I was optimistic as well. However, nothing seems to halt the losses or the debt load, and I do not see any upside in this company. UNLESS, you buy the bonds and try to get the real estate in bankruptcy.

[Fatih]

I find the constant berating of this company one of the cuases for the constant down fall. I recently visited the park in New Jersey and found the experience refreshing after not visiting for 3 years. The employees were friendly, the grounds were clean, and the entertainment delightful. I am not a coaster person; the carousel is more my speed. How are people to see these new changes if they constantly read the bashing statements and avoid the experience for themeselves? There are many bloggs out there that testify that the company is turning around, just give it a chance. It will take a lot of time for this company to turn around after almost a decade of poor management, but it will get there and the investors will not regret it. This company is on the right track, just the train is moving a little slow becuase of the economy which itself is not growing.

[User 220008]

Six Flags is not going anywhere for a long time. It is already starting to perform better than previous years and they have been making stellar changes. I have never been a Six Flags fan unless its Magic Mountain, but they are not as bad as there Share Price. This is entertainment, and it only takes a few improvements here and there to change a persons experience at an amusement park.

[ubu_ibi]

Im a season pass holder and a share holder. I love this park. There is plenty of money to be made in entrance, soda, food, candy, games, toys, gifts, advertising ect. I think the new management will strugle and ultimatley dominate peoples expectaions. I go there and cheer on the guy selling three crates of $4.00 drinks! The flash pass was a great way for customers to "have more fun" and for them to pay a "park premuim", they can't continue to lose money. They are cool, nice, clean, safe and fun. Were are all the thrill seekers going to go if they shut down a place like that? I think their gonna break their arms on skate boards or down hill mountain bikes or maybe a plane jump were the parchute doent work. If I die on a ride, screw it, Im dead. At least it was a pretty safe thrill. And as for the kid that got killed a while back, he was in a restricted area. Great America has some of the coolest, most axcessable and SAFE rides. I would'nt want a fly by day fair coming by and setting up those trinkets they call rides. I can see Disney and maybe some others (I've never been to) being nice too. But as far as Im concerned I beleive in Great America and I got 4100 shares to proove it. I only wish I could invest more, but a portfollio with to much of one thing is'nt a good idea. I think people will look back at this day and say this is when I should have got in on the action.