Ghost Town in the Sky revealed last week that it was driven into bankruptcy by the threat of foreclosure from BB&T, which holds outstanding debt on the property to the tune of $9.5 million.
In a bankruptcy hearing in federal court April 15, CEO Steve Shiver said the theme park has filed for Chapter 11 bankruptcy with the intention of returning to solvency. To do so, however, the Maggie Valley theme park must pull off a summer opening, Shiver said.
If the park is unable to open, more than 200 small businesses and companies would likely be left holding the bag on around $2.5 million in unpaid bills racked up by Ghost Town, including electricians, plumbers, building supply stores, souvenir and soda vendors, newspapers and billboard companies.
“I cannot emphasize enough the need to reopen the park to have the cash flow to pay everybody back,” Shiver told the handful of creditors who showed up for the meeting.
Shiver asserted the park was aiming for a May 22 opening, but offered few specifics on how the cash-strapped theme park would be able to ramp up in time.
If reorganization doesn’t work and BB&T forecloses on the park, it’s doubtful the sale of the Ghost Town would net enough to pay back the long list of businesses owed money, which stand in line behind BB&T’s $9.5 million.
“If BB&T forecloses, nobody gets paid except BB&T,” said David Gray, an Asheville bankruptcy attorney representing Ghost Town.
Shiver said he and the other owners of the park have invested personal money into the park to the tune of $5 million, which they stand to lose as well if Ghost Town doesn’t pull through. The same goes for numerous private investors who have equity shares in the company, Shiver said.
Shiver said financial troubles went back to the large capital investment required after buying the park in late 2006. The park, created in the 1960s, had been sitting dormant for five years. It had to overhaul the dated rides, prop up rundown buildings and bring infrastructure like electrical wiring and water lines up to code.
Beyond these short-term needs, the park needed fresh attractions that would appeal to today’s tourist audience, Shiver said.
To do all this — plus be able to pay its mounting stack of bills — Ghost Town was seeking an $18 million loan last year, Shiver said. When the credit crunch hit last fall, the lender pulled out at the last minute, he said. That left park owners scrambling for another source of money. Shiver said they chased a high-interest loan of last resort known as a “mezzanine loan,” but pulled out when it seemed too risky.
“At the eleventh hour, they wanted an additional payment to be sent overseas with no guarantee and we said ‘No guys, we don’t trust you,’” Shiver said.
When the last-ditch loan fell through, the park was forced to file for reorganization bankruptcy, Shiver said.
When creditors had a chance to ask questions of Shiver under oath, Mike Plemmons of Plemmons Plumbing and Heating in Waynesville, questioned a line of credit the park owners set up to funnel up to $500,000 into the operation.
“Will any of that be used to pay the creditors?” asked Plemmons, who is owed nearly $8,000.
Gray explained the line of credit will bypass those owed money and be used to get the park up and running.
“The whole concept is to save the debtor to pay the creditor,” Gray said. “If it operates, it generates money, it pays.”
But an attorney representing the interests of Mountain Energy of Waynesville, which is owed $14,600, questioned whether the park could operate at a profit even if it gets open. When the new owners reopened the park in 2007, it brought in $5.5 million. That year, the park had a positive cash flow, Shiver said. In 2008, however, revenue dropped to $4.4 million, and the park lost money that year, Shiver said.
Mountain Energy’s attorney asked Shiver what the break-even point was. Shiver said that information would be forthcoming when Ghost Town files its reorganization plan, a detailed business plan required by the bankruptcy court mapping out the park’s road to recovery.
“We’ll detail that fully in the plan,” Shiver said.
BB&T holds two notes on the property: a $6.5 million mortgage stemming from the original purchase of the property and a $3 million loan that funded upgrades. The initial mortgage is backed by a USDA Rural Development loan guarantee. If Ghost Town defaults, the guarantee would kick in to cover 70 percent of BB&T’s $6.5 million mortgage, courtesy of federal taxpayers.
Arnold Skelton, president of tourism brochure distributor Mountain Information Center who is owed $2,500, asked Shiver why the loan guarantee didn’t kick in already.
Gray explained that the guarantee would be triggered only as a last resort.
“BB&T has to proceed with legal collection outlets. BB&T has to attempt to collect and come up with a deficiency before the guarantee kicks in,” Gray said.
Shiver thanked the creditors for their cooperation as Ghost Town tries to get back on its feet.
“Thank you all for being there,” Shiver said.