Bankruptcy judge hears noteholder group’s dispute over 6 Flags reorganization plan

Judge hears arguments on 6 Flags reorganization

WILMINGTON, Del. — Attorneys for theme park operator Six Flags Inc. and a group of its noteholders squared off in Delaware bankruptcy court Friday over the company’s Chapter 11 reorganization plan.

Six Flags, which owns 20 amusement parks in the U.S. and other countries, sought bankruptcy protection in June, burdened by high debt and declining park attendance by economically strapped consumers.

After months of discussions with debt holders and secured lenders, Six Flags has proposed a reorganization plan involving a debt-to-equity swap that gives certain lenders — mostly banks — 92 percent of the reorganized company’s common stock. Under the plan, top executives could receive millions of dollars in bonuses upon emergence from bankruptcy.

Six Flags, which is based in New York, is asking the court to extend the time during which it has exclusive rights to submit a reorganization plan.

But holders of more than $500 million of notes issued by Six Flags Inc. claim they have come up with a better plan that would increase the recovery for creditors. They argue that the company should not be granted more time to complete a plan that gives preferential treatment to other noteholders but a relative pittance to their group, and that they should be allowed to present their own plan.

Six Flags attorney Paul Harner argued at the start of Friday’s hearing that the company’s plan is “not only viable, but confirmable,” whereas the noteholders’ plan is vague.

“It’s really not even a proposal; it’s a piece of paper,” he said. “It can’t conceivably be a basis for delaying this process.”

“The termination of exclusivity would throw these cases into substantial disarray,” added Harner, who questioned the timing of the noteholders’ proposal, submitted to the company late in the day on the Wednesday before Thanksgiving and giving Six Flags just two business days to respond.

The noteholders contend that under their plan, lenders would get full recovery in cash or reinstatement of their debt, and holders of notes issued by Six Flags Operations Inc., a subsidiary of the parent company, would be paid in cash instead of stock, using proceeds from a $420 million rights offering.

In addition to ruling on the exclusivity issue, Judge Christopher Sontchi also is being asked to approve the disclosure statement regarding Six Flags’ reorganization plan, which would pave the way for the company to begin soliciting votes from creditors on its plan.