Six Flags CEO John Reilly Just Sent Shareholders a 7-Word Warning About Its $5 Billion Debt. Here’s the Math for a Retiree Holding the Stock

Six Flags CEO John Reilly told investors on Thursday, in seven words, where his company stands with the people it owes: “We carry more debt than we want.” That debt is about $5 billion, and his answer is to sell more parks. The rest of his sentence was that “bringing it down is a priority,” and he went on: “We are actively reviewing our parks and real estate, including potential sales of non-core assets, to unlock value, reduce debt, and enhance liquidity.” Asked how many parks the company wants to keep, he gave no number.

Those seven words read as a warning: a company selling the parks it owns to pay the people it owes is shrinking until the debt fits. The limit on that reading is that the market heard a plan rather than a distress call. Six Flags Entertainment (NYSE: FUN) shares rose 26% in two days after the report, from $7.93 on Wednesday to $10.00 at Friday’s close, because the quarter was better than feared and nothing large comes due before 2028. If you own the stock, the number to understand is how much of the company you actually own.

Take a 71-year-old retiree who bought 2,000 units of Cedar Fair in November 2019 at $55.10, a $110,200 investment, for the income. Cedar Fair paid $0.935 a quarter then, $3.74 a year, a 6.8% yield, and he held the units in a taxable brokerage account because the partnership sent a K-1 every spring. In July 2024 Cedar Fair merged with Six Flags, each unit became one share of the new Six Flags, and the new company has paid nothing since. At Friday’s close the 2,000 shares were worth $20,000. He has $880,000 in index funds in an IRA and a brokerage account, so Six Flags is 2.2% of $900,000. His question, and yours if you hold the shares, is what the debt means for them and whether to keep them.

What the quarter said

Revenue was $1.17 billion, down 11.0% as reported because eight parks are gone, and up 1.4% at the parks the company still runs. The net loss was $366 million, or $3.59 a share, and $688 million of it was a non-cash write-down of goodwill from the merger. Adjusted EBITDA, the cash profit the lenders watch, was $493 million.

October was worse. Attendance fell 9%, about half of it from weather and half from the death of a 42-year-old man thrown from the Goliath coaster at Six Flags Over Georgia on Oct. 12 and the ride closures that followed. Georgia’s safety regulator is investigating, Six Flags has added seat belts and ordered an outside review of every ride it runs, and it now expects fourth-quarter adjusted EBITDA of $140 million to $150 million at its remaining parks, against $167 million a year ago. The courts are the other open item: X2 at Six Flags Magic Mountain in California was closed for good on Sept. 29 after lawsuits alleging brain injuries, a fourth suit was filed on Nov. 5, and the plaintiffs’ lawyers say more than 100 other riders have come forward. No dollar figure for any of it is in the filings yet.

What the debt means for the shares

Start with four numbers from the 10-Q. Debt principal is $4.92 billion. Cash is $268 million, so net debt is $4.66 billion. There are 102.3 million shares, and at $10.00 the stock market values all of them at $1.02 billion. The whole business, shares plus net debt, is worth $5.68 billion, and the lenders hold 82% of it. Every $10 share you own carries $45.51 of net debt behind it.

That is why the stock moves the way it does. A 10% change in what the business is worth, $568 million, is 56% of the value of the shares. The business earned $806 million of adjusted EBITDA at its remaining parks over the past twelve months, so it trades at 7.0 times that figure. At 6 times, the shares are worth $1.79. At 8 times, $17.56. A 43% slide in nine trading days after the Georgia death, and a 26% jump in two days after the report, are both ordinary for a stock built like this.

Interest is the second cost. Net interest expense was $287 million through nine months, about $382 million a year, which is 47% of that $806 million of EBITDA. Per share it is $3.74 a year, the same figure Cedar Fair paid its unitholders in 2019. The lenders now collect what the owners used to. The newest $1 billion of its notes, sold in January, pay 8.625%.

The third number is the target. Reilly wants net debt near 4 times EBITDA. At today’s earnings that is $3.23 billion, so the company has to cut about $1.43 billion. March’s seven-park sale brought in $258 million; it would take five and a half of those, or five to six years of the $257 million the business generated after capital spending in the first nine months. In January it also expects to pay about $370 million to buy out the partners who still own part of Six Flags Over Georgia, a third of its $1.06 billion of liquidity.

If the company gets to its target with earnings intact and the business still valued at 7 times EBITDA, the equity would be worth $2.42 billion, or $23.65 a share. That is the bull case, and its catch is in the first clause: parks that are sold take their earnings with them, so the path there runs through cash flow more than through sales.

What it means for his 2,000 shares

He bought for $7,480 a year of income and expected $52,360 over seven years. He received $8,540: two quarters at $0.935 before the 2020 suspension, eight at $0.30 from 2022 to 2024, and nothing since the merger. The 2,000 shares that cost $110,200 are worth $20,000, a paper loss of $90,200, or 81.9%. After the distributions he collected, he is $81,660 behind. At the Oct. 23 low of $6.77, the lowest close since November 2009, the position was worth $13,540.

The position is 2.2% of his savings, so it no longer decides his retirement. The decision is a tax decision. Selling at $10.00 realizes a $90,200 long-term loss in a taxable account. Set against an equal gain on his index funds this year, it saves $13,530 of capital gains tax at the 15% rate. With no gains to offset, it comes off ordinary income at $3,000 a year, which would take 30 years to use up. If you want to keep a stake in the recovery, you wait 31 days before buying the shares back, or the wash sale rule disallows the loss.

Analysts are more hopeful than his statement: the average target is $17, 70% above Friday’s close, with 8 of 14 ratings at buy, 5 at hold and 1 at sell. Deutsche Bank cut its target to $17 from $20 on Friday and kept its buy.

Where this is weak

The 7 times multiple is Friday’s snapshot, and the equity math moves by $7.88 a share for every turn. The $382 million of interest is nine months annualized. The retiree is illustrative, and if you hold the shares in an IRA the loss is worth nothing at tax time. The Georgia investigation and the X2 suits have no cost attached yet, and the credit agreements limit dividends, so the income he bought for may be years away even if the plan works.

The bottom line

Reilly’s seven words say the company will keep shrinking until about $1.43 billion of debt is gone. With 82% of the enterprise, the lenders take the first loss and the first gain, which is why a $10 stock can be worth $1.79 or $17.56 on a one-turn change in what buyers will pay. The retiree who bought 2,000 Cedar Fair units for $3.74 a year of income now owns a stock that pays its lenders $3.74 a share instead. At 2.2% of his savings the move is a $90,200 loss harvested this year, worth up to $13,530 against his other gains, and a decision about buying back in made 31 days later, with the debt number in front of him.

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