Hedge funds are looking to short Six Flags' bonds after the theme park operator said it may not be able to comply with financial covenants in its bank credit agreement. The bonds have fallen a couple of points over the past two weeks since it announced its financial difficulties June 22. Its 9.625% '14 bonds were down to 90 from 94, while its 8.875% '10 bonds have fallen to 92 3/4 from 94. "A number of people want to short [the bonds]," said a dealer. "They are not looking to buy it since it is still trading so high."
Six Flags is seeking amendments to its credit facility's financial covenants and is looking at options to sell six of its theme parks, it said in release. It added that total revenues were down 1% or $3.2 million compared to the same period last year, while attendance at its theme parks was down 1.3 million or 13% because of reduced season pass attendance. It said it would be "extremely difficult" to reach its EBITDA guidance over the year.
Fitch Ratings placed the company on ratings watch negative last week. In a report it said the company is required to maintain a leverage ratio of 3.25 times in the second quarter of 2006, a ratio of 3 times through year-end 2006 and a ratio of 2.5 times thereafter. It has a BB- rating on the bank credit facility. A company spokeswoman did not return a call.