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Six Flags May Not Survive 2009...


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15 Companies That Might Not Survive 2009

Rick Newman

Friday February 6, 2009, 11:53 am EST

Yahoo! Buzz Print Who's next?

 

With consumers shutting their wallets and corporate revenues plunging, the business landscape may start to resemble a graveyard in 2009. Household names like Circuit City and Linens 'n Things have already perished. And chances are, those bankruptcies were just an early warning sign of a much broader epidemic.

 

Moody's Investors Service, for instance, predicts that the default rate on corporate bonds - which foretells bankruptcies - will be three times higher in 2009 than in 2008, and 15 times higher than in 2007. That could equate to 25 significant bankruptcies per month.

 

We examined ratings from Moody's and data from other sources to develop a short list of potential victims that ought to be familiar to most consumers. Many of these firms are in industries directly hit by the slowdown in consumer spending, such as retail, automotive, housing and entertainment.

 

But there are other common threads. Most of these firms have limited cash for a rainy day, and a lot of debt, with large interest payments due over the next year. In ordinary times, it might not be so hard to refinance loans, or get new ones, to help keep the cash flowing. But in an acute credit crunch it's a different story, and at companies where sales are down and going lower, skittish lenders may refuse to grant any more credit. It's a terrible time to be cash-poor.

 

[see how Wall Street continues to doom itself.]

 

That's why Moody's assigns most of these firms its lowest rating for short-term liquidity. And all the firms on this list have long-term debt that Moody's rates Caa or lower, which means the borrower is considered at least a "very high" credit risk.

 

Once a company defaults on its debt, or fails to make a payment, the next step is usually a Chapter 11 bankruptcy filing. Some firms continue to operate while in Chapter 11, retaining many of their employees. Those firms often shed debt, restructure, and emerge from bankruptcy as healthier companies.

 

But it takes fresh financing to do that, and with money scarce, more bankrupt firms than usual are likely to liquidate - like Circuit City. That's why corporate failures are likely to be a major drag on the economy in 2009: In a liquidation, the entire workforce often gets axed, with little or no severance. That will only add to unemployment, which could hit 9 or even 10 percent by the end of the year.

 

[Want to land a plum job without paying taxes? Here's how.]

 

It's possible that none of the firms on this list will liquidate, or even declare Chapter 11. Some may come up with unexpected revenue or creative financing that helps avert bankruptcy, while others could be purchased in whole or in part by creditors or other investors. But one way or another, the following 15 firms will probably look a lot different a year from now than they do today:

Six Flags Is One Of Them:

Six Flags. (SIX; about 30,000 employees; stock down 84%). This theme-park operator has been losing money for several years, and selling off properties to try to pay down debt and get back into the black. But the ride may end prematurely. Moody's expects cash flow to be negative in 2009, and if consumers aren't spending during the peak summer season, that could imperil the company's ability to pay debts coming due later this year and in 2010.

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They havent paid a PIERS dividend for at least the past 4 quarters so now they make a payment of a few hundred million sometime in the fall. Theyre probably not going to be able to take out any credit for this to survive which im assuming is why they made this list.

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Check This Out. BAD NEWS!!!

 

It might be bad, but certainly not "NEWS". This has been known for quite some time.

 

As far as SFA goes, this place would have been sold off last year and turned into a housing development if the housing market had not started to tank.

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Hasn't Six Flags been in trouble since 2006? because I know they were having problems with stock and money related issues. But haven't they've bee in debt for about 2-4 years?

 

Just a thought.

 

They have been in debt longer then that and use all their current revenue to make interest payments on the debt.

 

In simple terms.

 

When SF couldn't keep up the interest payments in the past they had to sell assets (parks): First the European parks, then SFWoA, then the last round to PARC.

 

The lenders that SF owes money to need to realize the cycle will end in one of two ways:

1 - When SF runs out of assets to sell

2 - The lenders renegotiate the terms of the loan so that the lenders make money and SF can make money.

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There is no doubt that Six Flags is a troubled company, but there have been a few positive things this year. For the first time, the company is cash flow positive, meaning that they actually brought in a profit this year. While the odds are still stacked against them to survive as a company, many of the individual parks are profitable and would be sold off if the company was liquidated. I just don't see the bigger parks like SFMM, SFGAdv, SFGA, SFOT, SFOG shutting down at all.

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If I'm not mistaken the city of Santa Clarita already made it a valid point that they wouldn't let MM close even if they had to buy it themselves, or to a lesser extent not rezone the land to keep prospective buyers theme park operators. I would imagine that other major parks would get the same support from their surrounding communities.

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Hasn't Six Flags been in trouble since 2006? because I know they were having problems with stock and money related issues. But haven't they've bee in debt for about 2-4 years?

 

Just a thought.

 

2006?Try more like 2002.That's when the previous management began to drastically cut back on cap ex & many of the smaller parks(like SFA)suffered as a result.

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Yeah, I saw this on Yahoo this morning.

 

There are ALOT of companies that are in trouble, none of the ones on this list are surprising.

 

As for Six Flags, I kind of feel that they may be jumping the gun a bit. I actually think 2009 may be a good year for them. Why??? Because people will most likely not be travelling as much, and the local people close to Six Flags are still going to want to do something, and the price is good.

 

Of course, whether attendance increases results in more spending in the park remains to be seen.

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I've actually heard the opposite about Six Flags .. sure their debt is massive, but with the bad economy people are more likely to visit their local parks rather than take long (expensive) vacations. If Six Flags play this smartly, they might actually do OK.

 

I think the real issue is that no-one (certainly not any of us!) can reasonably predict what might happen. If you don't want your local park to close, then go there often and support it .. bring friends, and people who haven't visited before. Take advantage of the "bring a friend for [free/half price]" coupons, soda cans, and other promotions.

 

Cameron.

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I've gotta agree with Gregg.

 

We were in that boat in our hosehold last summer, so we packed up the kids and a cooler and headed to KI for a day of fun and sun. MY sister in law and daughter came along. We found reduced admissions, had a great time and spent less than $200 for the whole trip (gas included). If folks can get to a park within a couple of hours drive, I say they will go that route rather than the big week long trip to the beach or something.

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I'm not sure if this is completely accurate and up to date but, doesn't Six Flags Inc. just manage SFOT, SFOG, and SFStL. I thought i read somewhere that the three original parks were owned by a few investors and families. If SFI was to go under these three parks would be kind of safe for the time being?

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Yeah, I saw this on Yahoo this morning.

 

There are ALOT of companies that are in trouble, none of the ones on this list are surprising.

 

As for Six Flags, I kind of feel that they may be jumping the gun a bit. I actually think 2009 may be a good year for them. Why??? Because people will most likely not be travelling as much, and the local people close to Six Flags are still going to want to do something, and the price is good.

 

Of course, whether attendance increases results in more spending in the park remains to be seen.

 

That is exactly what I see happening in this economy. People need to tighten their budgets, so naturally the first thing to do is not spend as much on vacations. So rather then traveling across the country for a week, for much cheaper you buy a local season pass, or even just go for a day.

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