Six Flags' shares plunge after Moody's downgrade

[CablesEric]

Associated Press

Six Flags' shares plunge after Moody's downgrade

By KRISTEN A. LEE 09.25.08, 6:03 PM ET

 

NEW YORK - Six Flags Inc.'s shares plunged on Thursday after Moody's Investors Services downgraded the theme park operator's debt ratings deeper into junk status, on concerns about a potential future default.

 

Six Flags (nyse: SIX - news - people )' shares dropped 13 cents, or 14.9 percent, to 74 cents on Thursday. The stock has traded between 25 cents and $3.68 during the past 52 weeks.

 

Late Wednesday, Moody's (nyse: MCO - news - people ) said it does not expect Six Flags to create enough free cash flow or have sufficient unused revolving credit capacity to fund two upcoming obligations. Moody's said the shortfall may force the New York-based company to rely on asset sales or refinancing in a difficult credit market.

 

The mandatory redemption date for Six Flags' $287.5 million Preferred Income Redeemable Securities, or PIERS, is Aug. 15, 2009. Its remaining $131 million senior unsecured notes mature on Feb. 1, 2010.

 

Moody's noted the possibility that a PIERS refinancing could be based on the instruments' market value - which was roughly $82 million on Tuesday - rather than the full $287.5 million.

 

William Prip, Six Flags' senior vice president of corporate finance and treasurer, also noted the PIERS' discounted market value, which indicates that holders no longer expect the full liquidation preference. "It's probably fair to say that we'll have discussions with PIERS holders as they come to us," he said in a phone interview.

 

Moody's said the company's improved operating performance during the summer season was a positive sign. "However, Moody's believes Six Flags' highly levered capital structure and difficult credit market conditions could limit its ability to sell assets or execute on a refinancing, including the 2010 requirement even if the PIERS' maturities are somehow satisfied," the ratings agency said.

 

Moody's cut Six Flags corporate family and probability of default ratings to "Caa2" from "Caa1." The ratings outlook is negative.

Edited September 29, 2008 by Eric