Six Flags Inc. announced that it is likely to pursue a reorganization plan proposed by Avenue Capital Group following its bankruptcy filing earlier this year. According to Reuters, the original plan proposed by Six Flags management would have transferred a majority of the company's stock to senior lenders in exchange for lowering debt. The plan was met with opposition though because it was perceived to be too favorable to bank lenders compared to plans proposed before the bankruptcy filing.
The new reorganization plan was proposed by a group of bondholders that is led by Avenue Capital, a distressed hedge fund investor. The plan includes selling $450 million in new stock to raise money.
In the new plan, bondholders with around $420 in claims stands to receive 47.1% of the company as opposed to only 7% from the original proposal. Avenue Capital Management, which opposed the original proposal on the premise that management was enriching themselves at the expense of creditors, considers this new plan a small victory for the firm.
Opposition to the new plan may still arise however, from a junior class of bondholders such as Stark Investments who are unhappy with the new plan, citing that senior bondholders and management excluded them from negotiations. Preferred equity holders may also prefer another plan, specifically one in which the company cuts expenses to provide cash flow to creditors and some equity holders.
Avenue Capital Group was founded by CEO Marc Lasry and his sister President Sonia Gardner in 1995. The firm’s primary strategies focus on distressed and undervalued securities. |
