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Rating Action:

Moody's Lowers Six Flags PDR to Ca, Assigns Caa2 to Proposed Exchange Notes

14 May 2008
Moody's Lowers Six Flags PDR to Ca, Assigns Caa2 to Proposed Exchange Notes

Approximately $2.3 Billion of Debt Instruments Affected

New York, May 14, 2008 -- Moody's Investors Service affirmed Six Flags, Inc.'s ("Six Flags") Caa1 Corporate Family rating, downgraded Six Flags' Probability of Default Rating (PDR) to Ca from Caa1 and downgraded the ratings on Six Flags' 2013 and 2014 notes to Caa3 from Caa1. Moody's also assigned a Caa2 rating and LGD4-59% assessment to Six Flags Operations, Inc.'s ("SFO") proposed $400 million of senior unsecured exchange notes maturing in 2016. The rating actions follow Six Flags' announced offer to exchange its notes due in 2010 (at 90% of the original principal amount if tendered by the Early Tender Date) and in 2013 and 2014 (at 70% of the original principal amount if tendered by the Early Tender Date), in some combination although not fully, for the $400 million of proposed notes. The exchange involves no significant net cash proceeds to Six Flags or bondholders and is scheduled to expire on June 11, 2008. The rating actions are detailed as follows:

Assignments:

..Issuer: Six Flags Operations, Inc.

....Senior Unsecured Regular Bond/Debenture (2016 Exchange Notes), Assigned Caa2, LGD4-59%

Downgrades:

..Issuer: Six Flags Inc.

....Probability of Default Rating, Downgraded to Ca from Caa1

....Senior Unsecured Notes due 2013 and 2014, Downgraded to Caa3, LGD3-30% from Caa2, LGD5-76%

LGD Updates:

..Issuer: Six Flags Theme Parks Inc.

....Senior Secured Bank Credit Facility, Changed to B1, LGD2-20% from B1, LGD2-19%

..Issuer: Six Flags Inc.

....Senior Unsecured Notes due 2010, Changed to Caa2, LGD2-10% from Caa2, LGD5-76%

On Review for Possible Downgrade:

..Issuer: Six Flags Inc.

....Senior Unsecured Notes due 2010, currently Caa2, LGD2-10%

Outlook Actions:

..Issuer: Six Flags Inc.

....Outlook, Changed To Ratings Under Review (2010 Notes only) from Negative

..Issuer: Six Flags Operations, Inc.

....Outlook, Changed To Negative

The proposed $400 million of exchange notes will be guaranteed by Six Flags, Inc. and will be structurally senior with respect to the wholly-owned parks to the existing $1.4 billion of senior unsecured notes and $288 million of mandatory redeemable preferred stock (PIERS) issued by Six Flags, Inc. The SFO exchange notes and Six Flags, Inc. notes have the same senior unsecured claim on the Texas and Georgia partnership park interests. The exchange notes are effectively and structurally subordinate to the $1.1 billion senior secured credit facility issued by Six Flags Theme Parks, Inc. ("SFTP") with respect to the wholly-owned parks. SFO is a subsidiary of Six Flags, Inc. and an intermediate holding company of SFTP. Moody's estimates there is minimal room under the proposed 6.5x debt incurrence test (based on the Leverage Ratio, as defined, for SFO and its subsidiaries) in the exchange notes for incremental debt at SFO or SFTP absent an improvement in operating performance at the wholly-owned parks. In addition, the exchange notes have a change of control put right at 101% of par.

Moody's believes the exchange offer reduces the near term potential for a payment default on the non-exchanged securities (however, Moody's will classify the exchange as a default due to the distressed nature of the same), but it does not materially alter the credit profile reflected in the Caa1 CFR. The exchange offer alleviates some of the refinancing risk associated with the looming $280 million February 2010 bond maturity, but will likely affect the company's cash interest requirements only moderately (could increase or decrease depending on the mix of bonds tendered) and does not improve the company's weak cash flow generation or materially reduce the very high leverage. The exchange offer also does not address the August 2009 PIERS redemption date, although the company's negative equity position may preclude a redemption of the PIERS under Delaware law.

The current ratings on the 2010, 2013 and 2014 notes will remain in place until the exchange offer closes and are based on Moody's estimate of the expected near term loss on the original principal in the exchange offer given the likelihood of the transaction closing as outlined in the company's May 14, 2008 press release. As noted, Moody's expects to characterize the proposed transaction as a distressed exchange and will change the PDR to Caa1/LD if the exchange offer closes, and then back to Caa1 approximately three days thereafter. Moody's expects the ratings on any 2010, 2013 and 2014 notes that remain outstanding following the exchange offer to be Caa3 with a LGD5-85% assessment, although the LGD point estimates could change slightly depending on the mix of bonds exchanged. The current Caa2 rating on the 2010 notes remains on review for downgrade based on the expectation that the rating will be lowered to Caa3 upon closing of the exchange offer.

The B1 rating and LGD2-20% assessment on SFTP's credit facility, the Caa2 rating and LGD4-59% assessment on the proposed $400 million exchange notes, and the Caa3 rating and LGD6-98% assessment on the PIERS reflect the probability of a subsequent default on the non-exchanged securities and the projected loss given default of these securities, the latter of which is governed by Moody's loss given default methodology and the anticipated debt mix upon completion of the proposed exchange offer. Accordingly, Moody's anticipates the ratings and LGD assessments for these specific instruments will not change if the exchange offer is closed. The LGD point estimates on the credit facility were updated to reflect the change in expected debt mix.

Six Flags' Caa1 CFR continues to reflect uneven and weak operating performance resulting from shifts in strategy for the portfolio of regional theme parks, consistently negative free cash flow generation and very high leverage and financial risk. Debt-to-EBITDA (14.6x for FY 2007 incorporating Moody's standard adjustments) has increased in the last few years, notwithstanding significant asset sales, and is at a level Moody's views as unsustainable. Moody's expects the rating outlook will be negative upon completion of the exchange offer.

Please see the credit opinion posted to www.moodys.com for additional information on Six Flags' ratings.

Six Flags, headquartered in New York City, is a regional theme park company that operates 21 parks spread across North America. The park portfolio includes 19 wholly-owned facilities (including parks near New York City, Chicago and Los Angeles) as well as two parks - Six Flags over Texas and Six Flags over Georgia - in which Six Flags owns partial interests (currently less than 50%) but consolidates due to significant operational control and residual economic interest. Annual revenue approximates $970 million.

New York
John E. Puchalla
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Russell Solomon
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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