Zywicki on Theme Park Bankruptcy
The planned Chapter 11 bankruptcy of Hard Rock Park, the world's first rock and roll theme park, will require that the park's owners work out a plan with their creditors in order to reopen the park in 2009 under a reorganization, says Professor Todd Zywicki. The Myrtle Beach, SC, attraction closed its doors in its 2008 inaugural season after suffering the effects of lower attendance than expected and a changing credit market.
Creditors may demand changes in the company's management, said Zywicki. "The creditors now step into the shoes of the stockholders," he explained.
A Delaware judge is expected to rule Monday on the initial steps in the bankruptcy proceeding. Court filings have indicated the park has an asset value of between $100 million and $500 million, while it owes at least $343 million to its creditors.
Hard Rock filing itemizes blues, MyrtleBeachOnline.com, Friday, September 26, 2008. By Lisa Fleisher.
"The park, off of U.S. 501, blamed a drop in tourism and its own inability to advertise out of the Myrtle Beach area for its cash problems, which forced it to grind to a halt Wednesday when it filed for Chapter 11 bankruptcy.
"The park plans to reorganize under Chapter 11 and reopen in April. Under Chapter 11, businesses keep their creditors at bay while trying to rework their debt.
"'The main benefit of Chapter 11 is the opportunity to retain some control over your business, the opportunity to keep the business alive,' said Charles Tabb, the Alice Curtis Campbell Professor of Law at University of Illinois. 'It buys you time. That's the big thing.'
"Billed as the world's first rock 'n' roll theme park, the attraction promised greatness for the Grand Strand when it debuted in April, and businesses had high hopes that it would bring extra visitors to the area while helping extend the tourist season. The park had planned to operate nearly year-round.
"Yet the park did not have cash for enough out-of-market advertising - which had a 'devastating' effect on attendance, according to documents."