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Wednesday, 08 April 2009 15:52

Park starts lengthy reorganization process

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Despite the daunting hurdles faced by Ghost Town in the Sky to get the Maggie Valley amusement park open by summer, it could be only the beginning of a long, uphill slog to pull through bankruptcy reorganization.

Ghost Town managers say they are committed to getting the park back on its feet. If they stick to that plan, they will have to file a reorganization plan with the bankruptcy court in coming months.

Ultimately, the people Ghost Town owes money to will get to vote on the reorganization plan. With the list topping 215 companies, the vote could get interesting. The plan must be approved by the majority of creditors, and by those holding two-thirds of the total debt. The double-litmus test prevents a handful of the largest creditors from tipping the vote, and prevents the more numerous but smaller creditors from upstaging those with a bigger stake.

The bankruptcy judge has veto power over the reorganization plan, but typically defers to the vote of creditors. The judge could tweak elements of the reorganization plan if he spies something that he thinks is unfair or unrealistic. The plan, in general, will describe how the park plans to pay back creditors and over what time period.

Along with the reorganization plan, Ghost Town will submit a disclosure statement that offers an in-depth look at its finances. The disclosure statement will be the first order of business taken up the bankruptcy judge. It will provide crucial information for creditors when weighing whether the reorganization plan is realistic. For example, after making payroll and covering overhead, can Ghost Town bring in enough revenue to not only cover its costs but also slowly replay the debt it has racked up? If so, over what time period?

If Ghost Town doesn’t provide enough information in the disclosure statement for creditors to make an informed decision on the reorganization plan, the bankruptcy judge can make Ghost Town answer additional questions.

Ghost Town could choose at any time to throw in the towel on Chapter 11 and move to a Chapter 7 bankruptcy, which means the park would be sold off to the highest bidder and the money used to pay off as many of the outstanding debts as possible. But Ghost Town partners have said they are committed to turning the park around and remaining solvent.

A bankruptcy judge could analyze the situation and declare it hopeless, forcing the amusement park into Chapter 7 involuntarily, but that is highly uncommon. A bankruptcy judge typically gives a company an opportunity to turn things around.

Creditors will likely give Ghost Town’s owners the benefit of the doubt in reorganization as well. If Ghost Town goes to Chapter 7, the vast number of creditors will likely never get a dime, or at best would get pennies on the dollar of what they are owed. In a sense, the creditors have nothing to lose, so they may as well let Ghost Town owners give reorganization a shot.

“Once they are in reorganization it is really our job to work with them and give them the best opportunity to pull through reorganization,” said Roger Gardner, a ride engineer in Colorado who is owed $52,000.

There is roughly $10 million in debt that stands in line ahead of the myriad small companies owed money (see box on “Who is owed?”).

At the front of the line is about $9.5 million owed to BB&T — of that $6.5 million is for the initial mortgage and $3 million is for improvements to rides and infrastructure. Also at the top of the list is $200,000 in back taxes, and a yet-to-be-determined amount for Resurrection, LLC, a newly created entity loaning Ghost Town money (see sidebar).

If Ghost Town goes to Chapter 7 and is liquidated, it would have to net more than $10 million for any of the small businesses in line behind BB&T to see anything.

“It’s not in anybody’s interest at all. That is the last ditch,” said Gardner.

Ghost Town CEO Steve Shiver has said in the past that Ghost Town was seeking a large loan last fall in order to keep going. The loan would pay off bills, but more importantly complete a major overhaul of the park’s equipment, rides and infrastructure, as well as add new features to make the park more appealing to a 21st century audience.

The credit crunch killed the park’s shot at getting the loans, forcing it into reorganization, Shiver said. Shiver would not comment for this article, citing the sensitive nature of the proceedings.

While the case is small compared to the major Chapter 11 bankruptcies playing out on the national stage, the case is big for Western North Carolina’s bankruptcy division in terms of the 215-plus creditors with a stake in the game.

 

Who does Ghost Town owe?

The list includes more than 215 companies, many of them local businesses, like plumbers, electricians and contractors who did work on the mountain and several local building supply stores that provided a line of credit for materials. Ghost Town owes vendors that provided food for concession stands, souvenirs for the gift shops and even capguns for the gunfighters. The park also owes big bucks to ride engineers. Another category of debt is for marketing and advertising, including newspapers, TV stations, magazines and billboard companies.

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