Snyder's Six Flags Roller-Coaster Ride

[GAcoaster]

From the Wall Street Journal:

 

Snyder's Six Flags Roller-Coaster Ride

Owner of Football's Redskins Faces Bondholders' Rush

 

Four years ago, Washington Redskins owner Daniel Snyder led a contentious shareholder revolt at theme-park operator Six Flags Inc., unseating its management and becoming board chairman.

 

Today it is Mr. Snyder's job on the line, as a group of bondholders—emboldened by roaring credit markets— weigh whether to keep him in his post.

 

Mr. Snyder's fate seemed assured last June, when Six Flags filed a Chapter 11 bankruptcy plan to restructure more than $2.4 billion in debt. The plan handed the company to Six Flags' banks in exchange for erasing their debt, and set aside a 7% stake in the reorganized company for the senior bondholders. The deal also guaranteed Mr. Snyder's seat atop Six Flags' board.

 

But the plan soon raised the ire of Avenue Capital Group, a New York hedge-fund holding a chunk of Six Flags' senior bonds. These bondholders had been negotiating with Six Flags to take over the company themselves and later protested in court papers that Six Flags managers "ran to their banks in a sweetheart deal."

 

Now, the bondholders are poised to get their revenge. Led by Avenue's Marc Lasry and Michael Elkins, the bondholders have raised more than $1 billion in new debt and equity to wrest control of the amusement-park chain. Six Flags recently threw support behind the deal, which includes another new condition: Mr. Snyder's board seat, along with those of other current directors, is no longer assured.

 

The revival of credit markets has revitalized creditors who just months ago found themselves fighting for the last scraps of company assets. In many cases, companies struck deals with their banks, usually the first in line to be repaid under federal bankruptcy rules. Other lenders behind them typically received little value for their claims.

 

But recently these creditors, often bondholders or subordinated holders of bank debt, have become more confident, raising new money or litigating to get better results in bankruptcy cases. That is upending reorganizations at companies such as casino operator Trump Entertainment Resorts Inc., plastics maker Pliant Corp. and publisher Tribune Co.

 

Underscoring investors' increased risk appetite, some $123.5 billion in bonds have been issued by companies with "junk" credit ratings in the U.S. so far this year, according to data provider Dealogic. The number was $38.8 billion in 2008.

 

"The world has changed. Investors believe that the economy is getting better, which boosts up valuations of companies," said Jonathan Henes, a restructuring lawyer at Kirkland & Ellis LLP. Bondholders and other junior creditors now "see an opportunity to exert influence in bankruptcy cases and potentially increase the value they can recover," he said.

 

Mr. Snyder was just 31 years old when his direct-marketing firm, Snyder Communications, went public in 1996. He made a bigger splash in 1999, purchasing the National Football League's Redskins for $800 million.

Park Ticket

 

By 2005, he had set his eyes on Six Flags, reckoning he could take his marketing expertise to Six Flags parks spread across the U.S., Canada and Mexico. Mr. Snyder chastised the company for overspending on thrill rides that didn't appeal to families with small children.

 

He installed former ESPN executive Mark Shapiro as CEO, who busied himself trying to make parks "clean, safe and fun," banning bikini tops and smoking in most areas.

 

Mr. Snyder, meanwhile, went to work making good on a promise to investors to pursue "deals, deals, deals" with companies such as pizza-chain Papa John's International Inc. and Home Depot Inc. It was a page out of his Redskins playbook, where Mr. Snyder boosted revenues through corporate sponsorships and crisscrossed the country luring big-name coaches and players.

 

This past June, Mr. Snyder took thousands of longtime Redskins season-ticket holders to a local Six Flags park to spend a free day with dozens of players, including star running back Clinton Portis.

 

Six Flags' turnaround attracted Mr. Snyder but it also was "exciting to him ... like football was exciting," said Dennis Speigel, president of consultancy International Theme Park Services Inc. who got to know the Redskins owner.

 

"He gets a rap for being kind of a wild man, and tough, but he really had vision," Mr. Speigel said. "He just didn't understand the recessionary issues it could be hit with."

 

Even after delivering positive cash flow for the first time last year, Six Flags couldn't outrun the heavy debt burden amassed over the previous decade. At the start of 2009, Six Flags faced looming obligations, including a $300 million preferred shareholder payment in August.

 

In March, Mr. Shapiro started negotiating with Mr. Lasry's Avenue, which held about 30% of the company's $400 million in senior bonds. The two inched close to a deal in which bondholders would take over the company in exchange for cancelling its debts.

 

Over breakfast at his home, Mr. Snyder said he was amenable to a deal, but made clear he wanted to remain chairman of Six Flags' board, according to people familiar with the meeting. "I should be involved," he said.

 

Mr. Lasry told Mr. Snyder that he would consider the request, but that the decision would be left to bondholders. Mr. Snyder suggested running Six Flags was more complicated than Mr. Lasry and his team realized. "If you guys think you can do better ... this is not that easy," he said, gesturing to Mr. Shapiro, the CEO. "This guy has to look out the window and see if it's raining [and] adjust the business." So, Mr. Snyder said, "If you want it, it's all yours. Have at it."

 

Disagreements soon arose over how much capital Avenue would put into Six Flags, and Mr. Shapiro grew anxious the deal might fall through. On June 8, Mr. Lasry told Mr. Shapiro that Avenue would be willing to put up $100 million, half of what Six Flags figured it needed.

 

Mr. Shapiro had warned J.P. Morgan Chase & Co. Chief Executive Jamie Dimon that talks with Avenue might break down, and he returned to the senior bank lender to conceive an alternative plan. Just before 4 a.m. on June 13, Six Flags filed for bankruptcy in a deal handing a 92% ownership stake in the company to its banks in exchange for canceling $1.1 billion of debt.

 

The deal wiped out more than $50 million that Mr. Snyder's private-equity vehicle had invested in Six Flags. Mr. Snyder and his partners "lost a bunch of money," a person close to him said, adding that "it's nothing to brag about."

 

Still, Mr. Snyder and other directors kept their board seats.

 

Mr. Lasry was upset, having assumed Six Flags would still strike a deal with Avenue.

 

In September, Avenue and bondholder Fidelity Investments persuaded big banks, including J.P. Morgan and Bank of America Corp., to give Six Flags $800 million in new debt. That, plus a $450 million equity infusion from bondholders, would repay Six Flags' banks and give Avenue and Fidelity control.

 

Under pressure from the bondholders, Six Flags dropped its bank deal in November and filed a new reorganization plan emulating Avenue's suggestions. Messrs. Snyder and Shapiro continued talks with Mr. Lasry and others about the Redskins owner's future role.

 

"My job is to make sure everybody understands and appreciates what a good opportunity it is to have Dan remain a part of the board," said Mr. Shapiro, who is being retained. He added that he favors a "robust, independent process" for selecting new board members.

Football Focus

 

A person close to Mr. Snyder said he would "seriously consider" remaining board chairman if asked, but remains torn on continuing the role. Lately he has been focused on the Redskins, having just replaced his top personnel executive amid a disappointing season.

 

Other bondholders have tried to upend Six Flags' current plan, but haven't yet been allowed by a judge to present it to creditors.

 

On Dec. 2, Messrs. Snyder and Lasry met for coffee at the St. Regis hotel in Midtown Manhattan. Mr. Snyder again laid out how his business ventures and advertising relationships could help Six Flags.

 

Mr. Lasry left the meeting "more comfortable" but remains skeptical of the Redskins owner, said a person familiar with his thinking. The two agreed to meet again.

[CablesEric]

Snyder seems to be have loads of bad luck. Not only the issues with Six Flags, but also the Redskins suck!

Edited December 22, 2009 by CablesEric

[Thunderbolt]

Business is circular and cyclical. Snyder needs to meet the same fate as his Six Flags Predecessors, for making many of the same mistakes. Hopefully, he will receive his walking papers with Shapiro. Perhaps new owners will install officers with extensive theme park experience. I would love to see someone poached from BEC or Universal Orlando calling the shots. If nothing else, it would be interesting.

[Mike13]

Or maybe Six Flags can just die all together and individual parks bought.I would love for Great Adventure to be bought by Merlin or Blackstone.Blackstone being HIGHLY unlikely though.

[Thunderbolt]

I really don't want Six Flags to die at all. The success of Six Flags and increased competition helps everyone, and fosters a more vibrant industry. I just don't want to see what I feel are ant-consumer policies rewarded ($1 Locker Fees, lack of shows, etc.).

 

I still remember a whopper of a rumor; where Universal had interest in acquiring Great Adventure. A PortAventura style makeover would have rocked!

[Mike13]

I really don't want Six Flags to die at all. The success of Six Flags and increased competition helps everyone, and fosters a more vibrant industry. I just don't want to see what I feel are ant-consumer policies rewarded ($1 Locker Fees, lack of shows, etc.).

 

I still remember a whopper of a rumor; where Universal had interest in acquiring Great Adventure. A PortAventura style makeover would have rocked!

I know it's good economically with the competition,but at this point I feel like Six Flags image of a company is so bad that it would really have to take alot to improve it.I think that the locker policy is a good thing,and now alot more and more parks are adding lockers like Universal has.But yes they should be free,when I do entrance at rides that is probably the biggest complaint I have is that "Oh my god I have to pay 1 dollar at every ride now?" they blame it on me,but that's not the point lol,free would be better but I don't know if it's going to change after the bankruptcy.Shows will start to increase as we get money back,and more budget.

 

That was awhile ago with that rumor,was it really true or not does anyone know?I don't see it being true,but it would be cool if it were to be true!

[Yoshi]

I don't think many people if any at all would have problems with the lockers if they were free. I know I would never complain about them again if they were free to use (I have never complained to a ride op).

Edited December 23, 2009 by Yoshi