According to a court document filed on Thursday by Resilient Capital Management, Six Flags' management did not explore opportunities to pay off preferred securities which could have avoided bankruptcy.
Resilient also said members of the board have drained Six Flags' resources to benefit other companies in which board members have an interest. It also said management was conflicted by the windfall it stood to receive upon emerging from bankruptcy.
There can be no confidence in the current management of the debtors based upon evidence of its own self-dealing and the decisions it made that led debtors into bankruptcy, said the filing.
Resilient holds about $29 million of preferred shares known as PIERS and $1 million of convertible stock.
The court filing said a trustee was needed to investigate Six Flags' relationship with its senior lenders and Holihan Lokey Howard & Zukin Capital, the investment bank that estimated the company's value when it filed for bankruptcy.
Six Flags sought court protection in June with a plan that was far more generous to secured lenders than what the company had proposed in pre-bankruptcy talks. It argued at the time that the company was not worth enough to provide a larger recovery to bondholders, who were nearly wiped out.
In November, the company switched course and adopted a plan proposed by a group of holders of senior bonds, who were led by Avenue Capital Management, a hedge fund.
The Avenue Capital plan proposed selling new stock and new debt financing to pay secured lenders in full, leaving the company in control of the senior bondholders.
Hearings have been scheduled for March to approve that plan, which is opposed by junior creditors and Resilient.
The Avenue Capital plan proposes wiping out Resilient and other holders of the company's preferred and common shares.
Resilient's request said a trustee was needed because of conflicts among members of the board.
It cited Six Flags' purchase of a minority stake in Dick Clark Productions prior to filing for bankruptcy.
Red Zone, a company controlled by Six Flags Chairman Dan Snyder, owns the majority of Dick Clark Productions, and Resilient said Six Flags struck a number of licensing deals with Red Zone for the benefit of Snyder.
Rather than focusing on debtors' business, debtors' management turned its attention to Red Zone-related entities and treated Six Flags as a marketing catapult for Red Zone investments, said the court document.
Resilient said that if the court rejects the trustee request, it should appoint an examiner with broad powers to investigate the acquisition of Dick Clark Productions, the relationship with secured lenders and the events surrounding management's decision to file for bankruptcy.
The case is In re: Premier International Holdings Inc, U.S. Bankruptcy Court, District of Delaware, No. 09-12019.
(Reporting by Tom Hals; Editing by Richard Chang)