M&A

9 November, 2009

Six Flags agrees to Avenue Capital bankruptcy plan

By Tom Hals

WILMINGTON, Del., Nov 9 (Reuters) - Bankrupt Six Flags Inc (SIXFQ.OB) has submitted a new reorganization plan that represents a victory for hedge fund Avenue Capital Management, which fought an initial proposal that gave little to bondholders.

The world's largest regional theme park operator filed for bankruptcy in the middle of the year with a plan that transferred almost all of its stock to senior lenders, including JPMorgan Chase & Co (JPM.N), in return for cutting its debt.

The plan sparked immediate opposition, in part because it was far more favorable to bank lenders than what the company had proposed just prior to bankruptcy.

The company said it realized it had to modify its plan of reorganization after discussions with creditors, and as financial markets improved.

The "stabilization and loosening of the credit markets has created financing opportunities that did not exist at the times these cases were filed and the original plan was formulated," the company said in a court filing.

The new plan, which was filed with the court on Saturday, is based on proposals by the Avenue Capital group of bondholders and includes selling $450 million in new stock to increase the money available for creditors.

Led by Chairman Marc Lasry, Avenue Capital invests in distressed companies such World Color Press Inc (WC.TO), which filed for bankruptcy as Quebecor World Inc, and MagnaChip Semiconductor.

The new plan does not propose changing Six Flags senior management, which is headed by Mark Shapiro, a former ESPN executive.

The Avenue Capital bondholders had accused the management of using an initial plan that "enriches themselves at the expense of virtually every other creditor" in earlier court documents.

The new plan leaves in place some of the bonuses that Avenue Capital had earlier opposed, including more than $5 million for top executives if the company emerges from Chapter 11.

Bondholders are the biggest winners of the changes.

Holders of one class of unsecured bonds with claims of $420 million now stand to get up to 47.1 percent of the company under the new plan. Six Flags originally proposed giving them 7 percent.

Another class of unsecured bondholders with claims of $1.3 billion now stand to get as much as 4.8 percent of the company, compared to the original plan that offered 1 percent.

While the company said the plan had broad support, it may face objections.

At a hearing last week, a junior class of bondholders led by Stark Investments said the company and senior bondholders had excluded them from negotiations.

Preferred equity holders may also oppose the plan. Led by Resilient Capital Management, these investors had suggested a separate plan that focused on cutting expenses and maintaining cash flow to provide a recovery for all creditors and some equity holders.

The company has also attracted the attention of former managers, who in August offered to run the company for a $1 salary and said they could increase its value.

The case is In re Premier International Holdings Inc. and Six Flags Inc., U.S. Bankruptcy Court, District of Delaware, No. 09-12019. (Editing by Muralikumar Anantharaman)

Source: http://www.reuters.com