Tuesday, April 30, 2002
Six Flags, city reach a deal for Jazzland ; Company agrees to invest $25
Two months after Jazzland Theme Park went into bankruptcy, the
country's largest regional theme park operator stepped in Monday
with an offer to take over the operations of the park and invest $25
million in it over the next three years.
Oklahoma City-based Six Flags, which operates 38 parks in North
America and Europe, becomes the second bidder for the park and the
first major amu***t park operator to express interest. The other
bidder is a little known Florida firm called WAC International.
Six Flags won the backing of Mayor Marc Morial, and the company
satisfies a key city concern by agreeing to help pay off one of the
largest federal urban development loans in the nation -- a debt
for which the city is on the hook. But it will also have to win
support from developer Thomas Winingder, who owns the land and
dreamed up the idea of a theme park in the swamps of eastern New
Orleans, and of creditors who are owed more than $50 million in the
failure of the venture.
"This park faced problems because we had an inexperienced,
underfinanced -- but well-intentioned -- operator," Mayor Marc
Morial said Monday. "Six Flags makes sense because it's one, an
experienced operator, and two, it's one with deep pockets."
Gary Story, president and chief operating officer of Six Flags,
said his company is confident that it can turn Jazzland around. "We
have purchased many properties that have been in much worse
condition than Jazzland," Story said. "We think it is a property
that has not reached its potential, and we think New Orleans
deserves a world-class theme park."
Fans flocked to Jazzland during its inaugural season in 2000, but
many didn't return because they thought the park was too hot and the
rides too often were broken. The park had financial trouble from
dwindling attendance after the owners of the park twice promised a
roller coaster and failed to deliver, closed earlier than advertised
on summer weeknights, and abandoned plans to open for weekends and
school breaks during the holiday season.
The agreement sets up a specific timetable for reorganizing the
eastern New Orleans amu***t park and bringing it out of
By May 13, Six Flags will have prepared a draft reorganization
plan for the park, and drafts of other documents and agreements with
creditors. It will file formal versions of these documents in
bankruptcy court by May 15. The agreement calls for obtaining City
Council approval by July 18 and confirming the reorganization plan
in bankruptcy court by July 31, clearing the park to come out of
bankruptcy before another payment on its economic development loan
is due Aug. 1.
Story said Six Flags will take over operations as soon as the
bankruptcy court approves the company as manager of the park and the
source of funding to operate the park while it is in bankruptcy.
If Six Flags becomes the operator, the company says, it will
honor all Jazzland season passes and also will accept them at other
Six Flags parks.
The company plans to supplement the efforts of Jazzland General
Manager Terry Prather and his core management team at the park. No
major shakeups are expected. "We're actually quite impressed with
the team that's in place. It's remarkable that they've been able to
get the property open," Story said.
Six Flags' offer calls for investing $25 million in the park by
the 2005 season, with $20 million being committed by 2004. Also by
2004, Jazzland will be "re-branded" as a Six Flags theme park. The
company has not yet settled on a name for the park.
The investment is expected to consist of "a major attraction
ride, water section, children's area and shading," the agreement
Before Six Flags can say how it will develop the park, it needs
to study the daily operations of the park and conduct market
research on what would make New Orleanians visit the park. Exactly
what a "water section" is has yet to be determined: It could be
water slides or more water rides. "We know we have a climate issue
where we need to cool people down. We have to look at the best way,"
Ultimately, creditors will determine in bankruptcy court whether
to accept the offer of Six Flags or that of WAC International, which
made a surprise offer last week to buy the park and invest $50
million in it.
Doug Draper, Jazzland's bankruptcy attorney, said he will ask WAC
International for evidence that it has the financial strength to be
considered a real suitor.
"I don't want to go down the road where I have a good buyer and
lose them because I have somebody who doesn't have any money. I need
to do my due diligence to make sure the money's there," Draper said.
Last week, WAC's attorney said it was still raising the money,
but Debi McNabb, a spokeswoman for the company, later said the
company already has the money in place. WAC has not met with either
outgoing Mayor Morial or Mayor-elect Ray Nagin.
On Monday afternoon, Morial indicated that he would prefer to see
the publicly traded Six Flags take over the park. "Six Flags has the
Previously, the city had sketched out an agreement with a newly
formed company called Entertainment Associates. That company, made
up of executives at Alfa SmartParks, the company that currently owns
Jazzland, plus a retired Six Flags executive, did not have the money
to purchase the park.
This new agreement with Six Flags is more far-reaching and
detailed than the failed letter of intent between the city and
It addresses several issues with creditors that had the potential
to stall the sale of the park. For example, the agreement
acknowledges that Winingder is still owed money for selling the land
on which the park is built, and it says that the issue must be
settled before the transaction can close. It also recognizes the
existence of the park's disputed property tax bill, and takes the
position that only the land but not the improvements on the land are
The agreement also makes arrangements so the city would not have
to pay more than $1 million a year toward Jazzland's economic
development loan, which was coordinated through the U.S. Department
of Housing and Urban Development and is administered through the
city. Jazzland has missed its past two payments on that $25.3
million loan, one of the largest ever made in the federal program's
24-year history. The way the HUD loan is structured, the city is on
the hook for whatever Jazzland can't pay. The payments are $2.4
million a year.
As with the failed Entertainment Associates agreement, Six Flags
will be exempt from paying amu***t and parking taxes, but it still
will have to pay sales taxes.
Under the proposal made by Six Flags Monday, the amu***t
company would lease the park from a New Orleans public benefit
corporation, a move that gives the city more control over its
ability to repay the HUD loan. Six Flags will not have the option of
purchasing the park until 2017, when the load is paid.
The rent Six Flags would pay the city because it owns the
property the park sits on would be used to pay off the HUD loan
instead of being used for economic development purposes -- what
the money was supposed to be used for when Jazzland opened.
Under this agreement, Six Flags would have to pay the greater of
4.77 percent of Jazzland's annual gross revenue or $1.4 million,
ensuring that the city's annual exposure to the $2.4 million HUD
loan payment is no greater than $1 million.
After the HUD loan is paid off in 2017, Six Flags would only pay
the 4.77 percent base amount.
Starting in 2008, there also are formulas for the city to receive
additional money if the park generates more than $27.5 million a
year or if Six Flags invests additional money in the park beyond the
$25 million, excluding $500,000 a year in routine annual capital
The previous agreement with Entertainment Associates did not
include the floor payment of $1.4 million or the upside potential
for the city to earn more money if the park succeeds.
"It's a better deal," said Staci Rosenberg, a lawyer for the
. . . . . . .