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In this episode of Syndication Nation, 9fin’s podcast on all things leveraged finance, LevFin reporter David Westenhaver joins US deputy editor Sasha Padbidri to discuss his recent reporting on the wild ride that is Six Flags.
Fresh off the heels of a major refinancing, the company offloaded a handful of parks with the goal of deleveraging and focusing investment on a smaller portfolio. But will that be enough to fix the balance sheet? Or, after a decade of missteps, can the amusement park owner’s new CEO complete the operational turnaround that investors have sought for years?
Follow our reporting on Six Flags at 9fin.com. Have any feedback for us? Send us a note at podcast@9fin.com. Thanks for listening!
Footnote: The podcast mentions that Knott’s Berry Farm has one of the oldest wooden roller coasters, and that it is 65 years old. The roller coaster referenced was GhostRider, which was built in 1998. The oldest continuously operational wooden roller coaster in the world is Scenic Railway in Luna Park, Melbourne, Australia. The coaster entered operations in 1912.
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Sasha Padbidri:
Hello everyone and welcome to this week's Cloud 9fin Syndication Nation podcast where we unpack all things levfin-related. My name is Sasha and I'm the US deputy editor with 9fin. And joining me today is levfin reporter David Westenhaver, and he will be discussing his latest deep dive on Six Flags. Welcome David.
David Westenhaver:
Thank you, Sasha. Good to be here.
Sasha Padbidri:
Likewise, first podcast. So let's get to it.
David Westenhaver:
First podcast.
Sasha Padbidri:
Yeah. So tell us about your reporting. I mean, it was a great well-read, uh, well-written story. I really enjoyed it and uh, let's give our audience a chance to have a teaser of what that includes. So um, tell us a bit more about your recording. Um, as 9fin investors already know, Six Flags did a debt refinancing earlier this year. this year, which did fairly well. And the bonds now trade above par. So that's just one part of it. But what's the bigger story?
David Westenhaver:
The bigger story is essentially that Six Flags debt investors are ready for an operational turnaround that they've been waiting for for a few years now. Six Flags has a new CEO. John Reilly joined the company late last year and he's been saying all the right things. He's an industry veteran and people are hoping that now is finally the time for a much needed turnaround for Six Flags.
They've had some operational missteps over the last decade. They've had, I believe, eight CEOs in the last 15 years or so.
Sasha Padbidri:
That's crazy.
David Westenhaver:
When we were reporting that story in January, one buysider essentially said there's a lot of things to not like about the company but I still like it and I'm going to invest in the debt. And that was pretty par for the course in terms of what buy-siders had to say. So it's a very complicated story. There's a lot of challenges, a lot of them historic stemming from before their merger with Cedar Fair. But they have a strategy going forward and they've already begun to execute on that.
Sasha Padbidri:
Cool. Yeah. And as part of that strategy, I believe that they sold off a bunch of parks as well right like but is that is that enough to help their situation?
David Westenhaver:
I think it's helpful in that it shows that they're executing on their plan to focus their investment on a smaller number of parks. It doesn't necessarily move the needle too much on the balance sheet. I think the sale itself moved leverage from about 6.5 to 6.4x so rating agencies said it was leveraged neutral So the sale itself isn't going to allow them to deleverage, but it allows them to focus their capex on a smaller number of parks.
This essentially came from a discovery that the former CEO spoke about about a year ago where he said 80% of the revenue, 90% of EBITDA came from about 15 parks out of a portfolio, which at the time was more than 40 parks.
Sasha Padbidri:
Oh, wow.
David Westenhaver:
And there was some conversation around, oh, do we invest in these underperforming parks and try to bring them up to speed? Or do we kind of trim the fat of the portfolio and just focus the investment on the top-performing parks? And investors really decided that they wanted the latter. At least when I spoke to them in January, that's what they said. And this is Six Flags essentially saying, yeah, we agree with you and that's what we're doing.
Sasha Padbidri:
Cool. You mentioned more than 40 parks so that I'm assuming was after the merger with Cedar Fair right? Is that is that how they ended up with that much of a portfolio?
David Westenhaver:
Exactly, right.
Sasha Padbidri:
Okay all right cool. But before we unpacked the Cedar Fair fair merger and that rocky path I just wanted to know more about you know the company's attempts at approve uh improving their customer service because i know that some interesting stuff happened there.
David Westenhaver:
Yeah the customer experience, the main thing I got from sources was that it's not all about the roller coasters obviously that's the main thing you think of when you hear the name Six Flags and that is the main attraction obviously it's very important for the business, but the criticisms of Six Flags of late haven't been about the roller coasters. It's been about things like long lines, rides breaking down - which obviously is related - but long lines because of maintenance or just poorly maintained facilities, whether that be food and beverage areas, or just the appearance of the park in general. Not that it was falling apart, but I was reading one roller coaster blog and they said essentially every park could use a new coat of paint.
So it's a small thing, but it's the thing that can make the difference for a visitor especially when they're considering how much to spend on a trip like this. And so John Reilly the CEO has been adamant about improving that experience he's spoken a lot about food and beverage investments which you know is important for parents and people who are who are going there and spending. They've invested in technology. Apparently they're mostly done with that kind of investment, the kind of technology that will, again, allow their lines to move more quickly at retail spots, at food and beverage stands and that sort of thing. So it's kind of just greasing the wheels of the customer experience to allow it to be smoother and just more enjoyable.
Sasha Padbidri:
Got it. Yeah. No, that does sound like he's doing a lot there. But let's just step back for a moment. I really want to know more about the merger of Cedar Fairs. I know it's been two years or nearly two years since that happened, but it's not quite gone according to plan. And why is that?
David Westenhaver:
Investors have been critical about it. I think it largely comes down to the same conversation around downsizing the parks portfolio. It's that on a park by park level, they needed investment. And so when they upsized the portfolio, it just created a larger portfolio of underinvested theme parks. And so I think there was some question about, oh, where do we invest here? They do say that they've achieved full synergy in terms of cost savings. But at the same time, you know, investors haven't really been convinced that all of the promised synergies have really been achieved at this point.
Sasha Padbidri:
Got it. Six Flags also famously said that bad weather was a reason for their financial underperformance last year. So how are people feeling about that?
David Westenhaver:
That's a tough one because weather is a valid excuse. But at the same time, when it comes up repeatedly, investors grow frustrated and say, okay, there's more to the story here. Last year they did have a few bad weekends of weather. But at the same time, if that's happening repeatedly, it's more of an operational problem.
You know, they can rely heavily on some big weekends. If there's a rainy Memorial Day weekend, that's going to have an impact but it shouldn't be enough to derail your entire year, right? That's essentially what I heard from investors. They said it happens. It's an understandable challenge but it's one that should be able to be overcome. And so that's been a primary frustration for these investors is they've been pushing for operational improvements for some time. They've had a few different CEOs throughout that process, and a number of them have continued to blame the weather for their underperformance. And they're saying, we've heard that enough times. Let's just forget about the weather and actually perform with what we have here. So there's some impatience there, definitely.
Sasha Padbidri:
Got it. Well, it'll be interesting to see if they use weather again as an excuse in their next earnings or next full year earnings. Also, you did mention speaking with roller coaster enthusiasts for the story, which I want to unpack a little bit. What did they say about like the closure of Kingda Ka? Why were they so upset about it?
David Westenhaver:
Yeah, there's a few reasons with that. I think really it was a ride that kind of defined the Six Flags experience and its closure was almost more symbolic of some of the challenges facing the company. So one day in 2024, the ride closed down. There was no announcement beforehand, although some observers suspected that it might be closing down soon. They never announced it. They just closed the ride and then sometime a few weeks later, then they announced, oh, this ride is closed for good. It's never opening up again. They demolished it the following spring.
And, you know, there were some very real reasons that the ride needed to be torn down. Apparently, it was very expensive and required a lot of maintenance and upkeep. But it was also, you know, it was a famous roller coaster that brought in visitors. And had they communicated that ahead of time, people posited that maybe some of these roller coaster enthusiasts would have made an extra trip to the park. On top of that, they promised a replacement that was going to be going up this year. But that's been delayed as well. So I think for a lot of Six Flags fans, it's just become symbolic of some of the missteps that the company has become famous for over the last decade or so.
Sasha Padbidri:
Nice. That's good to know. And you know what? To your point about people trying to squeeze in one more trip had they given everyone the hits up. I think that's a good point to bring up because that's so true. So, final question and the hardest one of all. After doing all this reporting for the story, which Six Flags park would you like to visit the most and why?
David Westenhaver:
I think I would say Six Flags Magic Mountain. It's one of their most famous parks. It's in California. I'm from the West Coast. It's supposed to have their best roller coaster lineup. I don't know if I have the stomach for the roller coasters nowadays, days, but as someone from the West Coast, it's the most legendary park. Although I have been to Knott’s Berry Farm and that one is awesome. I had a great time there as a kid. So that would be second on the list.
Sasha Padbidri:
What's a scary one? The ones that go from the high to the low or the upside down one?
David Westenhaver:
Oh, for me, it was the wooden ones because they sound like they're going to fall apart.
Sasha Padbidri:
Oh yeah, the creaking sound. Yeah. I did Knott’s Berry Farm as a kid. I don't think I can stomach it right now.
David Westenhaver:
Yeah, no, I still have nightmares about the wooden roller coaster at Knott’s Berry Farm. It was a scary one.
Sasha Padbidri:
That's like what, what, 65 years old? Right.
David Westenhaver:
I don't know.
Sasha Padbidri:
More than that. It sounded like - it's one of the oldest roller coasters in the country if I'm not wrong. Don't quote me on that.
David Westenhaver:
I didn't know you were a roller coaster enthusiast.
Sasha Padbidri:
Low key I am. No, I'm not. Okay. But yeah, the Knott's Berry Farm was, uh, I did that one of my first couple of trips to America, very defining experience for me.
David Westenhaver:
Nice. Yeah, it's a fun one.
Sasha Padbidri:
Yeah. It really is. All right, to our audience, thank you for joining us and thank you David for doing your first podcast.
David Westenhaver:
Thank you for having me.
Sasha Padbidri:
For anyone who would like to read David's awesome story on Six Flags, please reach out to us at [podcast@9fin.com](mailto:podcast@9fin.com). Hope to see you on the next episode.
David Westenhaver:
Thanks, Sasha.
Sasha Padbidri:
Thank you, David.