* Q1 loss $1.50/shr
* Mexico closure to cut revenue by around $3 mln
* Shares down 16.7 percent
(Adds analyst, company comment)
By Deepa Seetharaman
NEW YORK, May 8 (Reuters) - Troubled theme park operator Six Flags Inc SIXF.OB, which has offered to exchange notes for stock in hopes of relieving its debt obligations, said on Friday its quarterly loss narrowed as it cut expenses.
But the company said sponsorship revenues were running weaker and added that an eight-day closure of its Mexico park tied to the H1N1 flu would also hit overall revenue.
"This year is going to be tougher than last year," Christopher Snow, a CreditSights analyst, said in an email.
He added that because Six Flags was experiencing higher labor and energy costs and having trouble maintaining sponsorship dollars from last year, "they're going to have to do better on attendance and spending just to get to the same level of cash flow."
The theme park operator last month offered to exchange certain notes for common shares as part of a restructuring plan in which it hopes to reduce debt and stave off a Chapter 11 filing.
Chief Executive Mark Shapiro said the company was hoping to shed about $870 million of debt and obligations tied to Preferred Income Equity Redeemable Shares, or PIERS.
"We know it will be challenging to obtain the level of participation required to make this offer work," Shapiro said during a conference call. But he added, "An in-court restructuring is not our desire."
Six Flags declined to say whether it would make an interest payment on senior notes that comes due May 15, adding that the company would likely signal its intentions the day before.
The company, which offers 800 rides at its 20 North American parks, said its first-quarter loss was $146.3 million, or $1.50 a share, compared with the loss of $157 million, or $1.64 per share, a year earlier.
First-quarter revenue fell 24 percent to $51.9 million from $68.2 million a year earlier. Six Flags said revenue was hurt by a weaker Mexican peso, reduced international fees and the shift of Easter into the second quarter from the first. The first quarter historically represents about 5 percent of annual revenue.
Six Flags said the eight-day closure of its Mexico theme park was expected to result in about $3 million in lost revenue. That park, which was closed at the direction of the Mexican government amid the outbreak of the new H1N1 flu, reopened on Friday.
First-quarter results "are generally irrelevant, but the weakness in sponsorship revenue will hurt," Joseph Staff, analyst with CRT Capital, said in an email.
Six Flags shares were down 16.7 percent to 35 cents on the OTC Bulletin Board on Friday. The stock was delisted from the New York Stock Exchange in April. (Additional reporting by Karen Jacobs in Atlanta; Editing by Dave Zimmerman, Phil Berlowitz)