Six Flags BankruptcyFor the third time since it first filed Chapter 11 bankruptcy, Six Flags Inc filed an amended reorganization plan of reorganization that if approved, will formalize last month’s agreement putting junior bondholders in control of the company once it exits Chapter 11 bankruptcy. Just last month, analysts thought that Six Flags would back a bankruptcy plan proposed by Avenue Capital Group bondholders; but just as negotiations were coming to close, the company switch sides in favor of a bankruptcy proposed by Stark Investments bondholders.

The newest plan proposes to use new debt and an equity investment by the Stark Investments-led bondholders to pay the claims of secured lenders and the Avenue Capital-led bondholders…The newest plan leaves in place CEO Mark Shapiro and gives him the right to name another board member. However, he cannot name current Chairman Daniel Snyder without the approval of the new equity investors.

The plan also leaves in place Shapiro’s proposed salary and bonuses, which both groups of bondholders criticized before the company adopted their plans.

Shapiro will receive a salary of $1.3 million a year, which isn’t any different than his pre-bankruptcy base pay. He will also collect bonuses of up to $3 million for helping Six Flags exit Chapter 11 bankruptcy.  Shapiro’s proposed salary has attracted sharp criticism from many who perceive his unchanged pay as unjustified considering the losses shareholders will sustain due to the bankruptcy filing.  And some critics have proposed changing bankruptcy laws so that there is a cap on the amount of compensation executives receive after Chapter 11 bankruptcy.  However, for their part, many companies warn that compensation caps may jeopardize a company’s ability to attract quality talent which is needed to successfully emerge from Chapter 11 bankruptcy.

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