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Six Flags Financial Covid Response

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Postby Sven18 on April 8th, 2020, 4:11 pm
SF has cancelled their planned Investor Conf Presentation on May28th

Preliminary Q1results:
Q1 revenue projected to be down $25-$30M, $9 million decrease from China deals.
Prior to closure revenue was higher than the 2019 to that point, driven by higher attendance & increase guest spending per capita

1)SF has acquired an increase of 131M in their revolving credit line from 350M to 481M & separately repurchased 51M on their 2024 note.

2) Operating Expenses reductions
-25 percent salary reduction for all executives and salaried employees and a 25 percent reduction in scheduled hours for all full-time hourly employees to 30 hours per week, subject to federal and state minimum reqs
-Suspended all advertising and marketing costs.
-board of directors has agreed that no cash retainer fees will be paid in the second quarter of 2020 to any director for service on the Board or any committee of the Board

- eliminate $30-40 million of additional non-labor operating costs in 2020, including the increased investments the company announced in its fourth quarter 2019 earnings release to improve the guest experiences.

3)Capex reductions
-deferring or eliminating at least $40-50 million of discretionary capital projects planned for 2020

4)The company estimates that its net cash outflow during suspended operations will be $30-$35 million per month

5)SF expects to have ample cushion under its debt covenants until at least the Q4 of 2020, even if the parks were to remain closed through September. The company has no debt maturities until 2024.

Even mentioning closure till September could be an ominous prospect.
Last edited by Sven18 on April 8th, 2020, 11:28 pm, edited 1 time in total.

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Postby Sven18 on April 8th, 2020, 4:26 pm
Addendum : SF suspended their dividend & all stock buybacks, they had 230M+ pre approved in buy backs from the board that carried over from 2019.

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Postby DeathbyDinn on April 8th, 2020, 11:20 pm
Sidewinder Safari has been removed from Discovery Kingdom's website and the old link leads to an empty page. Wonder if this is the first victim of Capex reductions...

As far as other 2020 additions, Crazanity already opened for a few days before SFM closed, and Jersey Devil, Aquaman, and Harley Quinn Spinnsanity are well into vertical construction, so I would assume those are all safe. Anything else though...

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Postby Sven18 on April 15th, 2020, 11:58 am
Private Offering of $665 Million of Senior Secured Notes by Six Flags 2025 Maturity

1)Via its indirect, wholly-owned subsidiary, Six Flags Theme Parks Inc (SFTP)offering a 665M secured note.
---SFEC(Six Flags Entertainment Corp) is a collection of subsidiaries, technically each park is incorporated as a subsidaiart
---A secured note means an asset is being put up as collateral(ie...a park). SF, CF, SEAS don't normally do secured notes, they do unsecured.

2)315M of the 665M secured 2025 note will used to pay down the 2024 Term B loan which had a balance of 796M at end of Q4
---SF also has a note maturing in 2024 that was 1B(they repurchased 51M of that note in Q1, which they disclosed in their filing last wee about increasing the revolver)

3)333M of the new note will be added to the balance sheet for expenses during closure

4)Note will allow amendment of credit facility to suspend the testing of the senior secured leverage ratio financial maintenance covenant through the end of 2020. They also got lenders to agree to change the calculation of the debt covenant leverage ratio using 2019 Q2. Q3, Q4 instead of 2020 Q2,Q3,Q4
---Essentially SF was going to violate the terms of their debt covenant & the issuance of the 665M was necessary to make debt holder comfortable enough to change the calculations. They did add sub stipulations on minimum liquidity covenant thru Dec 2021

SF Current Estimated Liquidity of $776M:
Cash $356 million
420M revolver credit line(increased last week)
---Interest expenses will be higher as a result of the recent transactions
--- leverage is now at least 5.8x from 5.2x as end of FY2019

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Postby Sven18 on April 15th, 2020, 4:41 pm

SF just made a new press release that the secured bond they were issuing was increased to 725M at 7.00% from 665M
---Interest rate is not good, SF previous notes were at 4.875%.

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Postby Jodon on April 15th, 2020, 4:53 pm
Any idea what park(s) they offered up as collateral?

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Postby Sven18 on April 15th, 2020, 5:33 pm
Jodon wrote:Any idea what park(s) they offered up as collateral?

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The note issuance says, Six Flags Theme Park Inc. which is a wholly owned subsidiary. Every park is technically a subsidiary with incorporation or LLC status. Haven't looked up what Six Flags Theme Park Inc pertains to. To get 725M has to be a bigger park or several smaller ones incorporated together. To do a secured note SF must have been turned down on an unsecured one or the interest rate was going to be really high to get buyers. 7% they got is not great. Theme Park Chains avoid secured notes unless absolutely necessary.

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Postby CoasterRiderSC on April 16th, 2020, 12:31 pm
Sven - does having more debt with a not great rate make SF LESS attractive for a takeover ?
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Postby Sven18 on April 22nd, 2020, 3:23 pm
It's not straight forward. Adding more debt increases the cost to buy SF. Their Enterprise Value (market cap plus debt and minority interest and preferred shares, minus total cash, cash equivalents, and marketable securities) increased as they took on debt. 2.8B+ debt now. However, the debt load might make them more likely to go bankrupt and be picked up at a lower price. The debt holders could get spooked if things go south & somebody could buy the debt. That new debt holder could use that to gain control if SF can't get new financing to pay the notes off or only can get financing at a prohibitive rate. The debt holder could offer to convert debt to shares. That's what happened in the 2009 bankruptcy & they gained majority control of the Board. hired JRA, etc...

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