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At Six Flags, bankruptcy could mean a 'success bonus'

April 14, 2009 |  4:15 pm

Roller-coaster riders at the Six Flags theme parks live for the unexpected thrill. Not so the chief executive of the parks’ parent company: His employment agreement now calls for payment of a $3-million bonus whichever way the financially strapped company ends up reorganizing -- in bankruptcy court or outside of court.

New York-based Six Flags Inc. has agreed to give CEO Mark Shapiro and other top executives "success bonuses" tied to the company’s workout of its debt problems, according to a company financial filing this week.

From Bloomberg News:

The bonus is part of an employment agreement with Shapiro extended through April 1, 2013, Six Flags said. Five other managers also had contracts extended with such bonuses. The accords keep the base salaries at current levels.

Shapiro receives a base salary of $1.3 million a year. Chief Financial Officer Jeffrey Speed, who earns $775,000, would get another $750,000 as a "success bonus." The plan would also give the executives stock options and restricted shares.

TatsusixflagsSix Flags has lost money every year of this decade. Its shares, which closed at 19 cents on Tuesday, will be delisted from the New York Stock Exchange on April 20.

Shapiro is trying to turn the company around by talking bondholders into swapping debt for equity. If they agree, he and other executives will qualify for their "success bonuses."

But even if bondholders balk, and Six Flags chooses to reorganize via Chapter 11 of the bankruptcy code, the execs still will qualify for the bonuses after the company emerges from bankruptcy.

Shareholders, of course, get no guarantees. With the stock at 19 cents, the market is pricing the shares for a total wipeout.

Executive-pay analyst Graef Crystal, author of  "The Crystal Report on Executive Compensation," is not amused. He told Bloomberg: "A ‘success bonus’ -- it just makes a profanation of the word ‘success.’ Success is going bankrupt? Success is coming out of bankruptcy?"

CFO Speed’s response, in an e-mail to Bloomberg:

"The success fee is based on a successful restructuring and substantial deleveraging of our balance sheet." The restructuring "is intended to provide the company with operational and financial flexibility to enable it to generate long-term growth."

-- Tom Petruno

Photo: Aboard the Tatsu coaster at Six Flags Magic Mountain in Valencia. Credit: Myung J. Chun / Los Angeles Times

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