Six Flags Theme Parks Come Out of Bankruptcy
The last few years have seen individuals and businesses go into bankruptcy at alarming rates, but now companies like Six Flags theme parks are coming out of bankruptcy to function again.
There were a host of reasons for the economic meltdown of 2008 and 2009. The mortgage and housing industry justifiably get a lot of flack. That being said, there was also a finance condition that led to the massive problems. It was the concept of leverage. Many businesses were taught that leveraging their businesses was a good business strategy.
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In practical terms, this meant borrowing money against the assets of the company to fund expansion and growth. Expansion is only good if done in a wise manner and at an appropriate pace. If economic conditions change the playing field, then that leverage becomes an anchor around the proverbial neck of the business. This is exactly what happened. When the economy failed, consumers stopped spending all at once. Growth died and companies suddenly faced huge debt loads that they could not handle. Bankruptcy was the result.
If there was one company that would be the poster child for this, it would be Six Flags. The company runs amusement parks across the country. The parks are huge attractions for families, but it is a competitive industry. Parks must constantly add new rides and such to compete. This cost money, which means taking on debt. As long as consumers continue to come, the numbers work out. When they don’t come, as happened in 2008 and 2009, Six Flags quickly ran into trouble and ended up in bankruptcy court.
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The numbers in June were ugly. The company owed over $2.7 billion to creditors and had $400 million coming due. It could not meet the debt obligation and dropped into bankruptcy court in an effort to reorganize the company and slash debt. After nearly a year of negotiations, creditors agreed to write-off a total of $1.7 billion in debt. That’s a big write-off! Six Flags is now coming out of bankruptcy at a perfect time as the strong summer season kicks off.
Six Flags is just one of many companies that came to regret the debt loads they were carrying. One can expect that the idea of leveraging assets to fuel expansion is a concept that will be viewed with more trepidation over the next few years.