Six Flags to exit bankruptcy as soon as next week

WILMINGTON, Delaware (Reuters) - Creditors of Six Flags Inc SIXFQ.OB reached a settlement that will clear the way for the theme park operator to exit bankruptcy just as it enters its peak season.

The deal ends a nearly yearlong Chapter 11 reorganization and cuts the company's debt from about $2.7 billion to about $1.15 billion. But the agreement also wipes out current shareholders, sending Six Flags stock down more than 50 percent.

"This creates a balance sheet that positions the company to grow the business on a long-term basis," Six Flags' Chief Financial Officer Jeffrey Speed said after the hearing.

Speed said the company hoped to exit bankruptcy as soon as Monday. The timing depends on the finalizing of financing documents, a lawyer told the court.

Just before the court hearing started, two groups of bondholders reached an agreement that would allow a group led by Stark Investments, a hedge fund based in Milwaukee, to take control of the operator of 19 theme parks.

In return, a group of bondholders led by Avenue Capital Group would be paid $420 million for their bonds plus more than $50 million for additional fees and expenses.

Speed did not specify if growing the business included acquiring a competitor such as Cedar Fair (FUN.N) or finding a new owner for the company, which will have numerous hedge funds among its shareholders.

During testimony earlier this year, Speed said Six Flags had been approached by private equity group MidOcean Partners, real estate magnate Sam Zell, Providence Equity Partners, Apollo Management APOLO.UL and Far East International Holdings of Hong Kong.

Earlier this month the largest shareholder in Cedar Fair, Q Funding III of Fort Worth, Texas, said in a regulatory filing it had been approached by the Stark-led bondholders about merging the companies.

Cedar Fair owns 11 amusement parks.

Q Funding III did not immediately return a call for a comment.

SHAREHOLDERS WIPED OUT

During the bankruptcy, Six Flags switched its allegiance several times, from backing a plan crafted by lenders to one backed by senior bondholders, and finally to the current plan.

The company will borrow about $1.1 billion and sell more than $700 million in new shares. The money raised will pay secured lenders in full, as well as the Avenue Capital group of bondholders.

The new shares will be sold to bondholders in the Stark group, which includes Pentwater Capital Management, H Partners and Bay Harbour Management.

Six Flags stock fell 52 percent to about 8 cents in over-the-counter trading.

Among the shareholders whose stake is being wiped out is Resilient Capital Management, a hedge fund that held preferred stock known as PIERS.

An attorney for the group said shareholders did not deserve to be wiped out, especially when management could get 15 percent of the reorganized company as a performance bonus.

Judge Christopher Sontchi was not very sympathetic.

"I find it implausible at the highest level that further delaying this case will result in additional value to the estate and any value to the PIERS and common equity," said Sontchi.

While the Stark bondholders managed to overturn an agreed plan in their favor, they did so by coming up with financing to pay for it, something that Resilient has not done, Sontchi noted.

"The reality is that someone has come to the table with money and there is no better indication of value."

Sontchi also noted that Six Flag's chief executive, Mark Shapiro, had come in to turn around a company burdened with debt and had shown some positive results.

The case is In re: Premier International Holdings Inc, U.S. Bankruptcy Court, District of Delaware, No. 09-12019.

(Reporting by Tom Hals; Editing by Phil Berlowitz)