Six Flags, R.H. Donnelley Miss Bond Payments as Defaults Rise

Six Flags Inc., R.H. Donnelley Corp. and Georgia Gulf Corp. missed interest payments on their bonds and are attempting to renegotiate financing terms as defaults rise.

Six Flags, the New York-based owner of amusement parks, and R.H. Donnelley, the yellow-pages directory publisher, decided to use 30-day grace periods instead of meeting the payouts due today, the companies said today in statements. Georgia Gulf, North America’s largest maker of vinyl construction products, said lenders agreed to conditions that would let the company postpone a $34 million bond interest payment until May 11.

“In the past, high-yield companies were able to refinance their way out of trouble,” Christopher Garman, chief executive officer of Garman Research LLC in Orinda, California, said in a phone interview. “In this cycle, that isn’t happening. Companies are faced with a set of least bad choices.”

Companies are increasingly defaulting on their debt during the worst financial crisis since the Great Depression. The global high-yield default rate reached 7 percent for the 12 months through March, up from 1.5 percent in the year-earlier period, Moody’s Investors Service said in a report on April 7. The credit-rater projects the figure will peak at about 15 percent in the fourth quarter.

High-yield, or high-risk, companies, those rated lower than Baa3 by Moody’s and below BBB- by Standard & Poor’s, are struggling under heavy borrowing costs, Garman said.

Junk Spread

The extra yield, or spread, investors demand to own junk bonds instead of Treasuries has widened to 15.7 percentage points from 7.65 percentage points a year ago, according to index data compiled by Merrill Lynch & Co. The spread reached a record 21.8 percentage points on Dec. 15.

Six Flags is skipping a $7 million interest payment on its $142 million of 9.75 percent securities maturing in 2013. The notes last traded on March 31 at 9 cents on the dollar to yield 224 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

R.H. Donnelley, which has $9.41 billion in net debt outstanding as of Dec. 31, missed a $55 million payment on its unsecured notes.

Georgia Gulf’s notes, which mature in 2014 and 2016, last traded on April 14 and April 8 respectively. The 2014 senior note traded at 18 cents on the dollar to yield 66 percent, according to Bloomberg data. The senior subordinated notes maturing 2016 traded at 8 cents on the dollar to yield 402 percent.

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