Six Flags creditors lose bid to reorganize company

Creditors of Six Flags Inc., the bankrupt theme-park owner, were denied the chance to file a reorganization plan that would compete with a company proposal.

U.S. Bankruptcy Judge Christopher Sontchi in Wilmington, Delaware, extended by 60 days the exclusive right of Six Flags managers to reorganize the company without facing a competing proposal from a group of noteholders owed more than $500 million.

Today's decision ends the fight by the noteholders to propose their own plan, which they say would give more to creditors than the company has offered.

Allowing a competing plan would have created "chaos" in the company's reorganization process by pitting noteholders in a long court battle against company lenders, including JPMorgan Chase Bank NA, said Six Flags attorney Paul Harner.

"This company cannot afford to stay in Chapter 11 much longer," Harner said in court today.

Six Flags, based in New York, filed for bankruptcy in June with plans to cut debt by $1.8 billion. Under a plan put together by company managers, lenders owed $1.1 billion would be fully repaid while two groups of noteholders would split about 30 percent of the stock in the reorganized company. Six Flags would raise $450 million by selling the other 70 percent of the stock.

Notes Fall

A few minutes after Sontchi announced his decision, Six Flags notes due in February fell almost 4 percent, according to Trace, the bond-price reporting agency of the Financial Industry Regulatory Authority. The notes, which pay 8 7/8 percent interest, closed down 9 percent at 20 cents on the dollar.

Last week, Sontchi began a hearing in which noteholders and Six Flags managers argued about whether creditors would benefit from competing reorganization proposals. Sontchi agreed with company managers, saying that two plans would delay Six Flags' exit from bankruptcy.

The ruling clears the way for the company to seek permission to send its plan to creditors for a vote. Sontchi said he would consider allowing such a vote later today.

Once creditors finish voting, Sontchi would make a final decision about whether to approve the company's proposal.

In the hearing last week, Six Flags Chief Financial Officer Jeff Speed testified that the company may not have enough cash to keep operating should the company remain in bankruptcy into May.

Bankruptcy 'Taint'

Under questioning by J. Christopher Shore, a lawyer representing noteholders, Speed also said annual earnings before interest, depreciation and amortization for the company were projected to be $240 million last January, and are now forecast to be $190 million.

Revenue declined in 2009 because fewer people came to the company's 20 theme parks, Speed said. He blamed the swine flu outbreak, depressed economic conditions, and the "taint" of bankruptcy, which could make some people question the safety of company amusements.

If Six Flags can exit court protection at the end of the year, Speed said, earnings for next year may reach $230 million.

At one point in the hearing, Harner suggested that the judge close the courtroom to the public to protect the confidentiality of documents while Speed was being questioned by lawyers.

"This is a public forum," Sontchi told lawyers gathered for the hearing. "I'm not going to seal the courtroom."

The lead case is In re. Premier International Holdings Inc., 09-12019, U.S. Bankruptcy Court, District of Delaware (Wilmington).