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Wednesday, 20 April 2011 20:24

Ghost Town bankruptcy hits dead end

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Ghost Town in the Sky has no hope of pulling itself out of bankruptcy, according to a federal bankruptcy administrator.

The court will decide this week whether to let the amusement park continue to languish in bankruptcy, where it has been stuck for two years now, or simply dismiss the case.

When a company is in Chapter 11 bankruptcy, it buys time from debt collectors while it attempts to get back on its feet. A company is not allowed to remain under bankruptcy protection indefinitely, however.

It must reorganize and present a viable plan for how it plans to pay off debt and continue operating. Or, it is forced into a liquidation, known as Chapter 7, where the assets of the company are sold off by the court and the money used to pay off the debts.

In this case, however, the bankruptcy administrator has recommended simply dismissing the case.

“The debtor has been totally inactive since June 2010 and there appears to be no chance of reorganization,” Linda W. Simpson United States Bankruptcy Administrator, wrote in court filings.

Two bankruptcy court hearings — one on reorganization and one on liquidation — have been on the docket for a year now. Each month, they have been continued.

Ghost Town has failed to file monthly reports as required by the bankruptcy court for the past year, nor has it paid quarterly bankruptcy court fees for the past 12 months. Meanwhile, Ghost Town’s bankruptcy attorney withdrew from the case in February after months of not being paid.

Once a tourism magnet in Maggie Valley, Ghost Town has been in bankruptcy limbo for two years now with debt topping $13 million. The park is also on the brink of foreclosure.

BB&T is owed $10.5 million dating back to the purchase of the park by new owners in 2007 and for subsequent repairs and upgrades.

The bank has initiated foreclosure against Ghost Town, and could auction off the property on the courthouse steps at any point in order to recoup what it is owed.

BB&T has held off on doing so at the urging of Ghost Town principals who want to save the park and have claimed for the past year that a financing deal is just around the corner.

The 288-acre mountain top property won’t fetch enough at auction to pay off all that BB&T is owed, which is likely why BB&T has stopped short of going through with foreclosure.

Meanwhile, the 200 small businesses collectively owed $2.5 million by Ghost Town — including dozens of local businesses left hanging after providing services or products — are out of luck. BB&T is first in line to get paid, and only if there is money left over after its $10.5 million is paid off does anyone else get money.

And that’s precisely why the bankruptcy court is poised to simply dismiss the case rather than go through the hassle of liquidating the company in a formal Chapter 7 proceeding.

“The liquidation value of the property is arguably less than what is owed the bank,” surmised David Gray, Ghost Town’s former bankruptcy attorney.

 

Windfall in back taxes

In the trail of bad debt left by Ghost Town, there is someone who has been paid. Haywood County recently got a $142,000 check to cover three years of back taxes on the 288-acre property. Maggie Valley got one for $110,000.

But it was BB&T — not Ghost Town — that paid the bill.

“We just know that we got it, and we are pleased with that,” said Tim Barth, Maggie Valley town manager, when asked why BB&T would have paid off Ghost Town’s back property taxes.

Whoever buys property at foreclosure inherits the unpaid property taxes. If the bank resumes title to the property, the bank bears the burden of paying the property taxes.

But BB&T hasn’t pulled the trigger on foreclosure yet — so why jump the gun and pay off those taxes before it has to?

BB&T is most likely looking out for number one. Since counties can foreclose on a property owner who has failed to pay their taxes, Haywood County could do an end-run around BB&T and foreclose on Ghost Town itself in order to get the tax money it’s owed.

The only thing keeping the county at bay for now is Ghost Town’s bankruptcy status: bankruptcy halts debt collectors in their tracks. But once Ghost Town gets the boot from bankruptcy court it will lose that protection.

By paying off the taxes, BB&T is buying time. It can continue to sit on the brink of foreclosure — continuing to give Ghost Town’s owners more time to pull off a financing deal — for as long as it wants. It remains first in line should money ever materialize without the threat of being displaced by a foreclosure from the county’s end.

In an interview with WLOS, Ghost Town General Manager and partner Steve Shiver alluded that Ghost Town may open in some capacity this year.

“We would like to have the park open for its 50th anniversary at some level. It may not be full scale. It’s just too early to tell,” Shiver said on television last month.

Following the broadcast, Shiver sent out a mass email to “clarify” the situation.

“Although we have no definitive information about our opening date for the 2011 season if any, we continue to make significant progress and are currently awaiting a decision by a third party regarding the disposition of the property. All indications are for a favorable resolution within the next month,” Shiver wrote in the email.

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