Six Flags debt-for-equity offer 'coercive'--Fitch

NEW YORK, April 20 Mon Apr 20, 2009 7:06pm BST

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NEW YORK, April 20 (Reuters) - Six Flag Inc's (SIX.N) recent offer to bondholders to swap some notes for equity amounts to a "coercive debt exchange," Fitch Ratings said on Monday, referring to a deal that hurts nonparticipating investors.

Fitch analyst Mike Simonton said the proposed exchange is "de facto involuntary" because it results in a "material reduction in terms" that can hurt bondholders who do not tender. For more, see [ID:nWNA2049]

Simonton also noted that investors are left with few options if they do not participate, pointing to Six Flags comments on Friday that it could seek an out-of-court restructuring or file for Chapter 11 bankruptcy protection if the exchange fails.

Fitch considers such exchanges the equivalent of a default because it hurts the value of the bonds and reneges on a promise to make regular payments to bondholders.

Coercion to participate can take the form of an explicit threat of bankruptcy or other action that would be to the "clear detriment" of creditors or other implicit threats. [ID:nWNA9172]

New York-based Six Flags said late on Friday it would seek to swap certain notes for common stock. The company said the offer, which involves 8.875 senior notes due 2010, 9.75 notes due 2013, and 9.625 notes due 2014, would expire June 25 unless extended or ended earlier. [ID:nN17351852]

Fitch said that, if the exchange was completed, it would downgrade its issuer default rating, which it already cut to a "C" last month reflecting its belief that some kind of default is inevitable.

If the offer fails, Fitch will maintain its rating.

The exchange offer is the debt-riddled company's latest move to stave off a bankruptcy filing and stay afloat.

Despite drawing 25.3 million visitors last year, Six Flags is trembling beneath $2.4 billion in debt, amassed during efforts to expand and build thrilling rides.

In a securities filing last month Six Flags said a bankruptcy filing could be its only option given soft consumer demand in the recession and a big cash payment due mid-August. (Reporting by Deepa Seetharaman; Editing by Andre Grenon)

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