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April 29, 2010 3:48 PM

Bankruptcy Rollercoaster Over: Six Flags Headed for Chapter 11 Exit

Posted by Brian Baxter

Lawyers for warring bondholders have reached an agreement on the future of Six Flags, allowing the second-largest amusement park operator in the world to emerge from bankruptcy just in time for its peak summer earnings season.

The settlement, between a group of bondholders led by Stark Investments and another led by Avenue Capital, was reached just an hour before the start of confirmation hearings on Wednesday, Dow Jones reports. As part of the deal, the Stark bondholder group will pay $470 million to the group led by Avenue Capital in order to satisfy debts of $420 million.

The $50 million in extra cash for the Avenue Capital group helped solidify the deal and secure confirmation of a bankruptcy exit plan proposed by the Stark group. As previously reported by The Am Law Daily, the two sides had been battling for control of Six Flags since late last year. (The Six Flags bankruptcy has had more twists and turns than some of the rides at the New York-based company's 20 theme parks.)

White & Case global financial restructuring chair Thomas Lauria, bankruptcy partner John Cunningham, and litigation partner J. Christopher Shore represented the group backed by Stark, a suburban Milwaukee-based hedge fund. Lauria did not immediately return a request for comment.

Blank Rome bankruptcy partner Jason Staib represented Avenue Capital, while the Avenue-led group of bondholders was advised by Akin Gump Strauss Hauer & Feld restructuring partner Ira Dizengoff.

"We supported the deal that ultimately got done," says Steven Levine, the head of Brown Rudnick's finance practice and a lead lawyer for Six Flag's official committee of unsecured creditors. "So we should get the confirmation order today, and the actual closing that will allow [Six Flags] to emerge from bankruptcy with new debt and equity financing should come by Monday."

Levine, Brown Rudnick bankruptcy and finance chair Edward Weisfelner, and litigation partner Andrew Dash led a team from the firm that had been working in alliance with bondholders backed by the Stark group since early December to oppose rival bankruptcy exit plans proposed by Avenue Capital and secured bank lenders. 

As a result of the deal between the groups, bondholders led by Stark will now have complete control of Six Flags, which filed for bankruptcy in Delaware last June. Unclear at the moment is the fate of Six Flags chairman and Washington Redskins owner Daniel Snyder, who took over the company in 2005. The current reorganization plan in place states that current CEO and former ESPN executive Mark Shapiro will remain a member of the company's board, but that the company cannot appoint Snyder as a director without the consent of Six Flags's new owners. (Snyder, like other Six Flags shareholders, will be wiped out once Six Flags emerges from Chapter 11.)

Paul, Hastings, Janofsky & Walker bankruptcy partner Paul Harner and litigation partner Steven Catlett represented Six Flags in Chapter 11 proceedings. Harner was still in Delaware on Thursday and unavailable for immediate comment.

Since Six Flags filed for bankruptcy nearly a year ago, court records show that Paul Hastings has requested compensation for more than $12 million in fees and expenses. Cadwalader, Wickersham & Taft, which is serving as special counsel to the Six Flags board of directors, has billed for roughly $693,000. (Delaware firm Richards, Layton & Finger is serving as local debtors' counsel.)

Brown Rudnick also found the Six Flags bankruptcy to be a lucrative engagement. The firm billed the debtor for nearly $6 million in fees and expenses through February, according to court records. Bankruptcy boutique Pachulski Stang Ziehl & Jones, which served as local counsel to Six Flags's unsecured creditors, has billed for nearly $152,000 through January.

Brown Rudnick's Levine says he's just glad that Six Flags's bankruptcy ride is almost over. With summer quickly approaching, Levine wouldn't mind one of the theme park operator's signature snacks.

"A free snow cone would be appreciated," he says. "Or a funnel cake."

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