US theme park operator warns it could terminate all schemes in China

Shares in Texas-headquartered theme park operator Six Flags Entertainment Corporation dropped by nearly 18% Friday (10 January) after it warned that it might terminate all its planned theme-park projects in China because its Chinese development partner, which it said was facing "severe challenges" amid "the declining real estate market in China", had defaulted on payment obligations.

Over 2017 and 2018, New York-listed Six Flags, which calls itself "the world’s largest regional theme park company", announced plans for a slew of new theme parks in China in partnership with Chinese developer, Riverside Investment Group.

In May 2018, the company announced its fourth theme park in the city of Nanjing alone, and its 11th overall in China, scheduled to open in 2021.

However, in an SEC filing on Friday, Six Flags said its plans for China had "encountered continued challenges and has not progressed" as the company expected.

It said: "The Company’s partner in China, Riverside Investment Group ("Riverside"), continues to face severe challenges due to the macroeconomic environment and the declining real estate market in China. This has led Riverside to default on its payment obligations to the Company and, as such, the Company has delivered formal notices of default under its agreements.

"While the Company continues to work with Riverside and each of Riverside’s governmental partners, the eventual outcome is unknown and could range from the continuation of one or more projects to the termination of all the Six Flags-branded projects in China."

It added that in the fourth quarter of 2019 it expected a negative $1m revenue adjustment related to agreements in China, along with aggregate one-time charges of approximately $10m related to the China international agreements and "unrelated litigation matters".
Separate to its problems in China, Six Flags said it expected revenue to be down $8m-$10m in the fourth quarter of 2019 compared to the same period in 2018 due to lower sales in North America.

By close of trading in New York Friday, Six Flags’ share price had fallen by 17.82%.

There has been a theme park boom in China in recent years, with hundreds springing up around the country.

However, in April 2018 China’s powerful central planning body, the National Development and Reform Commission, urged restraint and warned that local debt risks were emerging. 

Image: More hopeful days: Fanfare as Six Flags and Riverside Investment Group announce first-ever Six Flags-branded theme park in Haiyan, China in December 2016 (Business Wire)

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