Time Magazine 2009 Annual Report Download - page 132

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Georgia limited partnership exercised its right to purchase Six Flags Georgia units having a total purchase
price of $7 million. The remaining purchase price for limited partnership units in the Parks that were put
was funded through $6 million of cash that had been held in escrow to support the Six Flags Guarantee and
a loan from a wholly-owned Time Warner subsidiary (TW-SF LLC) of approximately $53 million (the
“TW Loan”). The TW Loan was made to SFOG Acquisition A, Inc., a Delaware corporation, SFOG
Acquisition B, L.L.C., a Delaware limited liability company, SFOT Acquisition I, Inc., a Delaware
corporation and SFOT Acquisition II, Inc., a Delaware corporation (collectively, the “Acquisition
Companies”). The TW Loan accrues interest at 14% per annum with a final maturity date of
March 15, 2011. Up to $10 million of the TW Loan has been guaranteed by Six Flags. The
outstanding principal amount of the TW Loan at December 31, 2009 was approximately $27 million,
reflecting payments by the Acquisition Companies during 2009.
Taking into account the limited partnership units purchased in 2009, the estimated maximum Cumulative
LP Unit Purchase Obligation for 2010 is approximately $300 million. In addition, the aggregate
undiscounted estimated future cash flow requirements covered by the Six Flags Guarantee over the
remaining term (through 2028) of the agreements are approximately $1.15 billion (for a net present value
of approximately $415 million).
On June 13, 2009, Six Flags and certain of its subsidiaries filed petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court in Delaware. Six Flags’ fourth
amended joint plan of reorganization and disclosure statement has been filed with the Bankruptcy Court
and voting on the plan is expected to occur in February 2010. A confirmation hearing on the plan of
reorganization is scheduled in March 2010. The plan of reorganization that ultimately becomes effective is
expected to result in a significant reduction in debt for Six Flags. The Partnerships holding the Parks and
the Acquisition Companies were not included in the debtors reorganization proceedings.
In connection with the proposed plan of reorganization of Six Flags, in October 2009, TW-SF LLC agreed
to provide the Acquisition Companies a new 5-year multiple draw credit facility of up to $150 million,
which the Acquisition Companies would be able to use only to fund their obligations to purchase certain
limited partnership units of the Partnerships. The new credit facility, which is subject to a number of
conditions precedent, including a final order confirming the plan of reorganization, would be in addition to
the existing TW Loan. New loans drawn under the facility would mature 5 years from their respective
funding date. Interest will accrue at a rate at least equal to a LIBOR floor of 250 basis points plus a spread
of 100 basis points over the applicable margin for a new Six Flags’ senior term credit facility, which will
close simultaneously with the closing of this facility.
Because the Six Flags Guarantee existed prior to December 31, 2002 and no modifications to the
arrangements have been made since the date the guarantee came into existence, the Company is required to
continue to account for the Guaranteed Obligations as a contingent liability. Based on its evaluation of the
current facts and circumstances surrounding the Guaranteed Obligations and the Subordinated Indemnity
Agreement, the Company is unable to predict the loss, if any, that may be incurred under these Guaranteed
Obligations and no liability for the arrangements has been recognized at December 31, 2009. Because of
the specific circumstances surrounding the arrangements and the fact that no active or observable market
exists for this type of financial guarantee, the Company is unable to determine a current fair value for the
Guaranteed Obligations and related Subordinated Indemnity Agreement.
AOL Revolving Facility
In connection with the AOL Separation, AOL entered into a $250 million 364-day senior secured revolving
credit facility (the “AOL Revolving Facility”) on December 9, 2009. Time Warner has guaranteed AOL’s
obligations under the AOL Revolving Facility in exchange for which AOL is paying Time Warner an
ongoing fee, subject to periodic increases, a portion of which varies with the amount of undrawn
120
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)