The dire state of finances at Maggie Valley Ghost Town in the Sky led the amusement park to file for Chapter 11 bankruptcy March 10.
The filing will allow the partners of Ghost Town LLC to structure a plan to try and pay back creditors, and protect the company from potential lawsuits in the process.
Sluggish ticket sales last season due to surging gas prices, coupled with the high costs of rehabilitating the park’s 48-year-old infrastructure, dealt a serious blow to Ghost Town’s anticipated revenues and debts mounted.
Nearly half a million dollars in liens have been filed against Ghost Town for unpaid services, including construction of the incline railway that takes visitors up the mountain, engineering services, equipment rental, and parts for the Cliffhanger roller coaster. The company owes money to multiple other vendors, according to the bankruptcy filing, and has an estimated debt load of $2.5 million, according to Ghost Town General Manager Steve Shiver.
Shiver said the company tried every avenue to secure a loan, but the current lending environment made it impossible.
“We were on the cusp of making this thing work, and then the credit markets absolutely fell apart,” said Shiver.
The company approached lender after lender, to no avail. The partners poured almost $4 million of their own money into the park, according to Shiver.
They even held state sales tax money garnered from sales of tickets and merchandise, which should have gone straight to state coffers. A document from the state Department of Revenue filed Dec. 19 of last year reveals that Ghost Town owes the state $97,739.82 in back sales taxes.
“They obviously had cash flow issues, and were using the (sales tax) money for cash flow purposes,” said Lee Shelton, a financial expert who resides in Maggie Valley.
In a last-ditch effort, Ghost Town partners were working to secure a high-interest “mezzanine loan,” just before the decision was made to file for bankruptcy, said Shiver.
“The credit markets collapsed and forced us to look at alternative lending,” Shiver said.
Mezzanine loans demand as much as 20 to 30 percent interest.
“Mezzanine financing is usually a lender of last resort, because you can’t raise any more capital and can’t find anyone else to provide conventional lending,” said Shelton.
But at the last minute, the deal fell through, said Shiver.
Bankruptcy “was an action of absolute last resort,” he said.
“We put a lot of money into repairing the park,” Shiver said. “The alternative is to close the doors and sell it for the real estate. It will bring pennies on the dollar in a forced sale.”
For Ghost Town to get back on its feet, two things have to happen — increased visitation and securing a loan to pay off its debts. No one knows for certain if either is going to happen.
Shiver expressed remorse for the situation the park is in.
“I am so, so sorry that we are in this position to owe local vendors and national vendors,” he said. “We don’t like this. I feel for all the small businesses affected by this.”
The Ghost Town lifeline
Small business is the livelihood of Maggie Valley, and Ghost Town’s impact on the many shops, hotels and restaurants in the area is far-reaching.
“We’re all in shock. We’re not happy to hear it,” said Mike Nelson, owner of Abbey Inn in Maggie Valley. “Ghost Town is very, very important.”
Nelson said the park is what defines Maggie Valley, and is still the top attraction – more so than other nearby features, like the Great Smoky Mountains National Park or the Blue Ridge Parkway.
“They come for Ghost Town,” Nelson said. “That’s what put Maggie’s name on the map.”
Maggie Valley Mayor Roger McElroy observed a drop of 30 to 40 percent in local business during the five years Ghost Town was closed. Visitor numbers since the park re-opened don’t rival what they once were, but the 130,000 people the park attracted last year — according to Shiver — is a far cry better than none at all.
“The point is that 50 percent of those people were from out of state, and most likely stayed overnight in the area,” McElroy said.
Ghost Town not only draws tourists, it creates jobs for locals. The park itself has a $2 million payroll and employs around 200 people in peak season, albeit some part-time; the tourists it draws also create 100 to 200 jobs in the hotel, restaurant and shopping industries.
“There are a lot of folks that are not going to have jobs if this park is not successful, and there’s a lot of money that will not filter through the community,” said Shiver.
Key to success
Ghost Town partners plan to open the park May 15 and are banking on drawing 150,000 visitors this season despite the economic recession.
Critical to the park’s success will be its ability to get two of its biggest rides – the incline railway and Cliffhanger Rollercoaster — working.
Along with high gas prices, the failure to get those rides working since Ghost Town re-opened may have contributed to the dip in visitation during the park’s second season.
“The numbers I heard around town were that in 2007, things were up very nicely since Ghost Town was back, even though they had their problems,” Nelson said. “And in 2008, it definitely slumped off, primarily because Ghost Town did not achieve the numbers it needed.”
Indeed, the Maggie Valley Visitors Center saw the number of visitors increase by 40 percent the year the park re-opened. But in the park’s second season after re-opening, a study conducted by the Haywood County Tourism Development Authority found no significant increase in the number of children visiting the county.
Getting the Cliffhanger Rollercoaster inspected by the state has been a major obstacle. The company Ghost Town hired to build the roller coaster train had never built one before, and the design lacked the necessary tests, which slowed the process.
Ghost Town now has just one more test to perform before it can open the Cliffhanger, said Shiver, which the partners were not expecting.
“The thrill and excitement of our roller coaster is that it’s got a loop, but no over the shoulder harness,” Shiver said. “The N.C. Department of Labor wanted to see some tests on the restraints, and that’s what we were getting ready to do.”
When The Smoky Mountain News interviewed Shiver in November of last year, he said the park had completed 400 test runs of the new coaster and sent the results of those to state officials. It’s unclear why more tests have been required.
Attempts to secure the necessary money to run the tests, however, were unsuccessful.
The incline railway is another story.
“That’s got some hurdles,” Shiver said. “It’s close as well. We replaced the track, but we’re in discussion with the vendor. We’re actually in court with the vendor.”
The vendor, Industrial Service Group of Georgia, has filed a lien against Ghost Town in the amount of $407,910. Shiver refuses to discuss the case.
The amount of money Ghost Town investors have spent to rehab old park structures and bring them up to safety code has been a big financial drain.
“This group agreed to pay probably more than it was worth,” McElroy said of the park. “They had to do a tremendous amount of work they didn’t anticipate.”
Shelton wonders if the investors opened the park prematurely.
“There wasn’t competition to buy the place, so it wasn’t like you had to be in a rush,” he said. “They could have taken their time and probably could have brought in the state inspectors and said, take a look at this.”
In a press release, Ghost Town officials said they will make opening the rides a priority, and hope that doing so will increase visitor numbers.
“Once The Cliffhanger Rollercoaster...is open, Ghost Town will appeal to a broader audience, including thrill-seekers, teenagers and pre-teens,” the press release stated.
It added: “By completing the Incline Railway, Ghost Town will save a significant amount of money on bus transportation and will attract more school groups who, in the 2007 and 2008 season, had to be bussed to the top of the mountain where the Theme Park is located.”
Outpouring of support
Right now, Ghost Town is, “working with the courts through our attorneys and our creditors to come up with a real plan that will be acceptable and approved by the court,” Shiver said.
The partners continue to search for financing.
“We’re working with several potential sources for post-petition financing, and that’s ongoing,” said Shiver. “They are companies that specialize in this kind of financing, and there are banks involved as well.”
Shiver said the May 15 opening date, while hopeful, is still tentative.
“We are shooting for that, but of course, it all depends on our ability to restructure and finance,” he said.
The community has shown an outpouring of support for the embattled park.
“I’m just humbled by the support and phone calls that I’m getting,” said Shiver. “It’s been overwhelming, and I’m so grateful and thankful to the people of Maggie Valley.”
The community is doing what it can to help. Maggie Valley’s Tourism Development Subcommittee, which gets funding from the county’s room tax, has agreed to give Ghost Town some of its money for advertising. Local leaders have also reached out to state officials.
“We’ve talked to our legislators and hope that we can work with them and express to them how bad it’s going to hurt if Ghost Town fails,” said McElroy. “Hopefully they can come through with some help.”
“We’ve got to get the word out to the judge that we the community want it to stay alive,” said Nelson.
Shiver wants to get the ball rolling, and put Ghost Town back on the path to success.
“There have been many sleepless nights,” he said. “I’m just anxious to get it done for the community, and for our creditors and investors.”