NEW YORK, July 9 (Reuters) - Sellers of protection on Six Flags' (SIXFQ.OB: Quote, Profile, Research) bonds are facing losses of 86 percent of the insurance they sold after an auction was held on Thursday to determine the value of the bankrupt company's credit default swaps.

CDSs on Six Flag's bonds recovered 14 cents on the dollar, said auction administrators Creditex and Markit. Contracts insuring the company's loans were found to be worth 96.125 cents, they said

CDSs are used to insure against a borrower defaulting on its debt or to speculate on its credit quality.

Payments on the contracts were triggered last month when Six Flags, the world's largest regional theme park company, filed for bankruptcy protection with the agreement of its lenders to reduce debt by $1.8 billion.

Net volumes of around $265 million are outstanding in credit default swaps insuring Six Flag's debt, according to data by the Depository Trust & Clearing Corp. (Reporting by Karen Brettell; Editing by Dan Grebler)