Bankruptcy Update: Six Flags’ Creditors Denied Right To File Competing Plan

December 18th, 2009 by Reed Allmand

Bankruptcy judge Christopher Sontchi has denied the request of Six Flags’ creditors to file a competing bankruptcy reorganization plan and extended by 60 days the exclusive right of Six Flags to reorganize the company in bankruptcy. The bankruptcy court agreed with Six Flags that allowing creditors to submit a competing bankruptcy plan would have endangered the company’s exit from bankruptcy and possibly the future of the company.

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.

Six Flags has also continued to assert that its bankruptcy filing is a “taint” upon its image and that if they remain in bankruptcy too long, it could scare away potential customers.  Their bankruptcy attorney even requested that the bankruptcy judge seal the courtroom.  That request was denied.

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

Six Flags has been in bankruptcy since June 2009 after it was unable to climb out of debt and was faced with declining revenue.  Six Flags hopes their Chapter 11 bankruptcy will cut their debt load by $1.8 billion. Since the bankruptcy court has given Six Flags another 60 days, they will now send their bankruptcy plan to their creditors for approval. If both creditors and the bankruptcy court approve the Chapter 11 bankruptcy plan, lenders owed $1.1 billion would be fully repaid while two groups of noteholders would split approximately 30 percent of the stock in the reorganized company. Six Flags would also raise a possible $450 million by selling the other 70 percent of the stock.