WILMINGTON - Senior bondholders who drafted the reorganization plan for bankrupt Six Flags should reveal their investments to determine if they fairly represented themselves to the theme park company, according to a court filing by creditors.
In November, Six Flags adopted a reorganization plan drafted by a group led by Avenue Capital Management, a hedge fund that holds a large portion of the theme park operator's senior or SFO bonds.
During negotiations, Six Flags management believed the Avenue Capital group also held at least 20 percent of the junior or SFI bonds and therefore represented the interests of those investors, according to court documents filed on Thursday by the official committee of unsecured creditors.
The junior noteholders, led by hedge fund Stark Investments, have launched a fight against the Avenue Capital plan, which they have said undervalues the company and limits their recovery.
The creditors' committee said that during talks with Six Flags about forming a reorganization plan, the Avenue Capital group held about $200 million in SFI claims.
About the same time the SFO Noteholder Committee was negotiating plan terms and representing themselves to own SFI notes, members of the SFO Noteholder Committee were engaging in transactions to take advantage of, or at least protect themselves against, the negative treatment they were seeking to impose on holders of SFI notes under the SFO plan, the filing said.
The committee asked the court to prevent members of the Avenue Capital group from participating any further in the case if they did not reveal their holdings and when they sold their junior note claims.
Avenue Capital and Six Flags could not immediately be reached for a comment.
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 Maureen Bavdek)