The recent recession and financial crisis brought carnage to many industries when cash flows dropped, as Americans cut spending to rebuild their balance sheets. Some companies managed to survive this era of higher savings through cost cutting and restructuring, while others had no choice but to find solace in bankruptcy court. Many of these companies were in the gaming, leisure or entertainment related industries.
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  • Six Flags
    Six Flags owns 21 amusement parks worldwide, and is one the most recognizable brands in the amusement park industry. The company owns 18 parks located in 10 states, including California and Texas. It's brand is international as well, and Six Flags has properties in Montreal, Canada, Mexico City and the United Arab Emirates. Unfortunately, all of these properties consumed a lot of cash, and the company became overloaded with debt and onerous interest payments, limiting the company's financial flexibility.

    The company filed what is known as a pre-packaged bankruptcy in June, 2009. This refers to a situation where the creditors and the company are generally in agreement on the best way to restructure a company, and need the bankruptcy court to approve the plan.

    The court finally approved this plan nearly a year later, and on May 1, 2010, Six Flags came out of bankruptcy. The company's debt was reduced to $1 billion, down from $2.7 billion at the end of 2009, and $725 million in equity was put into the company by outside parties. Six Flags plans on going public as soon as practical.

  • Trump Entertainment Resorts
    Trump Entertainment Resorts (OTC:TRMPQ) owns three casino resort properties - the Trump Taj Mahal Casino Resort, the Trump Plaza Hotel and Casino, and the Trump Marina Hotel Casino - all located in Atlantic City, New Jersey. The company intentionally skipped an interest payment due December 1, 2008, on a senior note issue, and filed for Chapter 11 bankruptcy in February 2009, as discussions with creditors failed to come to an agreement.

    These three casinos reported combined net revenue of $167 million in the first quarter of 2010, from a combined 3,600 hotel rooms.

    The bankruptcy court approved a plan of reorganization in April, 2010 that was presented by the company, and this has led to a battle between Trump Entertainment Resorts and its creditors, led by Carl Icahn. Icahn has appealed the ruling by the court, and this one is not over yet. (For more on "The Donald", see Millionaires With The Most Bankruptcies.)

  • Reader's Digest
    Reader's Digest is a storied American publication, first published in the 1920s. Since that time, the magazine has grown to encompass 50 different monthly editions with a circulation of 16 million globally. The magazine is published in more than 60 countries and 20 languages.

    The company was taken private in 2007 through a combination of debt and equity, and struggled with its interest payments. The company also filed a pre-packaged bankruptcy plan in August 2009 involving a debt for equity exchange, and emerged from bankruptcy in February 2010. Reader's Digest ended up cutting its outstanding debt by 75% through the filing.

    The company continues to have problems, however, and just reported an operating loss of $27.1 million in the quarter ending March 31, 2010. These results were affected by a number of charges during the quarter, making it difficult to determine if the restructured company will be able to achieve sustained profitability.

  • Midway Games
    Midway Games was a video game maker, and the creator of such hits as Mortal Kombat, Pac Man and others popular video games. Over a 20-year history, Midway Games published more than 400 titles in both the pre-video era, and then also for all the popular gaming platforms including the Microsoft Xbox, Sony PlayStation and the Nintendo DS and Wii.

    Midway Games filed for bankruptcy in February, 2009, after the company's majority owner sold its stake, triggering an acceleration of debt repayments.

    Unfortunately for Midway Games, the company couldn't come up with a plan to reorganize, and the court approved a liquidation plan. The plan provides creditors with a payoff of either 25% or 16.5% of face value, depending on the type of claim.

  • KB Toys
    Another company to disappear through bankruptcy was KB Toys, which operated a chain of mall-based toy stores. KB Toys was able to compete for years against larger stores, but finally came up against discount chains like Wal-Mart and saw sales and traffic drop off.

    The company filed bankruptcy in 2004, and came out as a privately owned company a year later. Things didn't work out despite the restructuring, and KB Toys entered bankruptcy again in 2008 with a plan of liquidation. All KB Toys stores were closed, its inventory liquidated and competitor Toys R Us bought the company's trademarks and brands in 2009 for $2.1 million.

The Bottom Line
It should have been fun and games for these companies that are in the toy, leisure or entertainment industry, but it was anything but that as the recession of the last few years decimated cash flows and forced all into voluntary or involuntary bankruptcy. Some came out to live another day, but others disappeared forever. (To learn more, see An Overview Of Corporate Bankruptcy.)

Catch up on the latest financial news in Water Cooler Finance: Buffett Speaks Up, AIG Deal Collapses.

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