| |||||||||||
| |||||||||||
 A $2.4 billion debt load proved to be too wild a ride for theme park operator Six Flags Inc. to handle as it landed in Chapter 11 bankruptcy over the weekend. Bringing in deep-pocketed investors like Bill Gates' Cascade Investment LLC and new management roughly three years ago helped turn around Six Flags' flagging performance, but management was never able to dig out of the deep hole of debt it inherited. With the filing Six Flags hopes to join Hard Rock Park in Myrtle Beach, S.C., and Ghost Town in the Sky amusement park in Maggie Valley, N.C., in getting a fresh start out of a Chapter 11 filing. Operated by HRP Myrtle Beach Holdings, Hard Rock Park filed for bankruptcy less than a year after it opened and was eventually saved from liquidation when its assets were sold to FPI MB Entertainment LLC for $25 million in February. (The Deal Pipeline subscribers can read the full story here.) Likewise, Ghost Town Partners scared up $500,000 in debtor-in-possession financing on April 23 from Resurrection Partners LLC in hopes of reopening its Old West-themed amusement park. (The Deal Pipeline subscribers can read the full story here.) While those operators needed the courts to lift the debt load off of them, other theme park operators are taking different steps to whittle down their debt in the face of diminished attendance brought on by the recession. In March, rival regional amusement park operator Cedar Fair LP (NYSE:FUN) hired Merrill Lynch & Co. to find a buyer for some of its properties as it seeks to reduce its $1.8 billion debt load by about $200 million over the next three years. (The Deal Pipeline subscribers can read the full story here.) The Sandusky, Ohio-based company is in talks to sell its Santa Clara, Calif., Great America park to the San Francisco 49ers football team; it also wants to divest its Worlds of Fun park in Kansas City, Mo., and its Valleyfair park in Shakopee, Minn. Even the industry's 800-pound gorilla is tightening its belt. The Walt Disney Co. (NYSE:DIS) eliminated between 400 and 800 jobs at its Walt Disney World resort in Orlando, Fla., and Anaheim, Calif.-based Disneyland earlier this year. The layoffs follow a voluntary buyout offered in January to more than 600 executives, according to Corporate Dealmaker. However, not every theme park operator is pulling back as the recession keeps vacationers close to home. Although it is staring down the barrel of $950 million in debt that needs to be refinanced by April 2010 amid a tight credit market, Universal Studios Inc. is rolling the dice to make major upgrades to its two Florida parks: Universal Studios Orlando and Islands of Adventure. The Universal Studios park is set to unveil a new headliner coaster this summer, expecting to draw crowds away from cross-town rival Walt Disney World. But it's on 2010 that the company has bet the farm, when Universal plans to open in Islands of Adventure a new 20-acre "Wizarding World"-themed land based on the immensely popular Harry Potter books and movies. A spokesperson for Universal Orlando said the company does not comment on capital expenditures for new attractions. The Orlando Sentinel estimates that attendance at Universal's Orlando parks fell almost 20% during the first three months of the year. But Universal is counting on some Potter magic to turn that around. Should Universal's gamble pay off in terms of increased attendance as credit markets continue to loosen, the company is likely to find refinancing a bit easier, particularly with its deep-pocketed owners General Electric Co. (NYSE:GE) and the Blackstone Group LP (NYSE:BX) working on its behalf. The debt refinancing looms especially large for Universal since failure to rework it would result in a $500 million loan, also coming due immediately. However, there is some Hollywood-style drama that could complicate Universal's refinancing. According to the Orlando Sentinel, Universal has a consulting contract with Steven Spielberg that gives the director-producer a percentage of Universal's gross revenues in perpetuity. The newspaper writes: "Spielberg's contract, in addition to paying him a percentage of the revenues generated every year by Universal Orlando and its two theme parks. ... Unless the clause is renegotiated, lenders who consider loans to Universal beyond June 2010 will have to factor in the possibility of a Spielberg payout -- especially because the contract with Spielberg is structured so that he must be paid before any other financiers or lenders." Spielberg's deal also allows Universal to buy him out of it, but at a very hefty cost. Whether or not Spielberg and Universal can work out a happy ending remains to be seen, but how often do Spielberg and Harry Potter fail to deliver a blockbuster ending? - George White See Six Flags restructuring press release See Dealscape on Six Flags Chapter 11 warning See The Deal Pipeline data on Six Flags (subscription required) See The Deal Pipeline story on Hard Rock Park (subscription required) See The Deal Pipeline story on Ghost Town (subscription required) See Corporate Dealmaker post on Disney See Orlando Sentinel article on Universal attendance See Orlando Sentinel article on Universal Studios/Spielberg
CategoriesCommentsPrivate capital video
Categories
Blog roll
Archives
| |||||||||||
|
|
|
|
|
©Copyright 2009, The Deal, LLC. All rights reserved. Please send all technical questions, comments or concerns to the Webmaster.
I assumed the 49ers were just using some of the land that Six Flags was on, not buying out the whole thing.