UPDATE 3-Six Flags emerges from bankruptcy

Mon May 3, 2010 3:13pm EDT

* Leaves Chapter 11 just as it enters high season

* Company has financial flexibility for new strategy

* Owned by hedge funds; to list shares on NYSE (Adds comment from financial advisor paragraphs 9-10)

By Tom Hals

WILMINGTON, Del., May 3 (Reuters) - Theme park operator Six Flags Inc emerged from Chapter 11 bankruptcy on Monday after wiping out more than a billion dollars of debt by turning the company's ownership over to bondholders.

The company, which operates 19 amusement parks in North America, enters its high season without the constraints of bankruptcy and with less than half the debt it had when it filed for Chapter 11 last June.

The New York company now has more financial flexibility to pursue a shift in strategy toward attracting more families to its amusement parks, a move spearheaded by Mark Shapiro when he took over the top executive job in 2006.

The company exits bankruptcy as Six Flags Entertainment Corp and under the control of hedge funds such as Stark Investments, Pentwater Capital Management and Bay Harbour Management. The funds owned its bonds and invested $725 million to recapitalize the company.

Management could own up to 15 percent of the company.

The new equity along with new debt will be used to pay off creditors and finance the company as its main summer season nears.

The company's pre-bankruptcy shares were wiped out under the reorganization, and Six Flags has applied to list newly issued shares on the New York Stock Exchange.

The company will emerge from bankruptcy with $1 billion in term debt, well below the roughly $2.7 billion it had when it filed.

During its bankruptcy, the company said it could not support more than $890 million of debt. An adviser to the bondholders that now control the company said the debt level is manageable.

"We never believed the company couldn't support a billion dollars of debt or more than a billion," said John Madden, a managing director at Chanin Capital Partners, a unit of Duff & Phelps.

One analyst noted the cost of borrowing has fallen recently, changing the calculations about debt.

"Their interest expense is not as onerous as it would have been if they had emerged three or six months ago," said Robert Goodman, senior vice president of CRT Capital Research in Stamford, Connecticut.

SNYDER OUT

The bankruptcy ended the Daniel Snyder era at Six Flags. The owner of the Washington Redskins football team led a proxy fight for the company in 2005 and installed himself as chairman.

On Friday, the company said Snyder would not be part of the reorganized company's board.

Snyder brought in Shapiro from sports network ESPN and Jeffrey Speed, the company's chief financial officer, from Euro Disney. They emphasized the use of childrens' characters such as Thomas the Tank Engine and Bugs Bunny to better appeal to families.

While the company was hobbled by the recession, it was also the center of a fight among creditors who spent tens of millions of dollars on legal fees trying to gain control of the business.

Among its attractions to investors: The company seems likely to benefit as families spend on leisure again, and it occupies a sweet spot in a sluggish recovery as parents opt for local "staycations" over pricey trips.

At the court hearing to confirm the company's bankruptcy plan, Speed would not tip his hand regarding acquisitions to expand.

One likely target could be Cedar Fair LP (FUN.N), a Sandusky, Ohio, operator of 11 theme parks and seven water parks. Apollo Management recently dropped its $635 million planned takeover of Cedar Fair, a bid that was opposed by Q Funding III LP, Cedar Fair's biggest shareholder.

Q Funding, which is fighting to reshape Cedar Fair's board, has said in regulatory filings that the bondholders who now own Six Flags had approached them about merging the two theme park operators.

Q Funding and Six Flags did not immediately return a call for comment.

The bankruptcy case is In re: Premier International Holdings Inc, U.S. Bankruptcy Court, District of Delaware, No. 09-12019. (Reporting by Tom Hals, editing by Gerald E. McCormick)

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