Bankruptcy an option for cash-strapped Six Flags
NEW YORK — Shares of Six Flags Inc. touched a new all-time low Friday after the theme park operator said it could not meet a looming financing obligation and may have to file for Chapter 11 bankruptcy protection.
As the shares dropped, Moody’s Investors Service cut the company’s corporate family rating and probability-of-default rating by two notches to "Ca" — the second-lowest — saying an out-of-court restructuring or a bankruptcy filing "is likely in the near term."
The New York-based company, which owns 20 parks in the U.S., Mexico and Canada including one in Eureka, said Wednesday in its annual report that a Chapter 11 filing is possible if it doesn’t reach a deal to restructure its debt.
Six Flags shares, which have traded under $1 since September, dropped 3 cents, or 15.8 percent, to close at 16 cents after hitting a fresh low of 14 cents earlier in the session. The stock has traded between 16 cents and $2.50 during the last 52 weeks.
In its fourth-quarter earnings report on Tuesday, Six Flags said it does not expect to have enough cash to pay off its preferred income redeemable shares, or PIERS, when they mature on Aug bad credit payday advance. 15 and a total of more than $300 million will be due.
Six Flags said a Chapter 11 filing could occur well before August, if the company decides an out-of-court agreement is not possible or to its advantage.
The PIERS obligation has been an ongoing concern for Six Flags investors. The company has opted to skip the payments since May to save cash, in part because unpaid dividends don’t accrue interest.
On Friday, Moody’s noted that failure to fund the PIERS redemption would qualify as a default under Six Flags’ credit agreement, accelerating those payments and triggering a default on bonds issued by the company.
Last month, Fitch Ratings placed Six Flags on Rating Watch Negative as an issuer, citing concerns the company would not be able to make the PIERS payment.
A Six Flags representative did not return a call for comment on Friday. The company has scheduled a conference call with its investors before the market opens Monday.
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