Plans for an Arizona youth sports destination to bail out of financial troubles have yet to materialize, and the clock appears to be ticking.
Bell Bank Park, which was scheduled to open in January 2022 and publicly claims to be a smash hitwith 4.3 million guests in its first year, left a trail of mechanic liens from unpaid contractors and became declared in default by the Trustee on the Tax-Exempt Debentures used to establish it.
The developers of the venue, which is designed as a destination for youth sporting events such as soccer, volleyball and basketball touring team tournaments (it also offers pickleball competitions for an older demographic), have formed a non-profit organization dedicated to issuing tax-free bonds to the Funding qualifies it.
This 501(c)3, Legacy Cares, issued $284 million in bonds through the Arizona Industrial Development Authority in 2020 and 2021 to build the 320-acre venue in Mesa, Arizona.
In October, the trustee USB Bank, NA declared events of default after Legacy Cares failed to make three full monthly payments to the revenue fund that supports debt service on the bonds.
A series of filing filings on the Municipal Securities Rulemaking Board’s EMMA website followed in November – and they propose a limited window of opportunity to solve Bell Bank Park’s problems through a new debt issuance, which the borrower says it wants to do.
After a notification dated November 4th Default remedies available from the bond trustee include expedited payment – whereby holders declare the entire outstanding principal and accrued interest immediately due; Receivership – where the trustee appoints a receiver for the venue and its earnings; Foreclosure; and an action for judgment on the bonds.
In the notification of November 4 and a subsequent communication on November 16the trustee announced that it had consulted with a group of bondholders who control a majority of the capital, and these “senior holders” directed the trustee to negotiate a forbearance agreement with the borrower, which would include, among other things, submitting a detailed remedy would require the Borrower Plan, which “is expected to include changes to the Issuer Documents and the Borrower Documents relating, among other things, to improved reporting by the Borrower and the Manager.”
No further disclosures of the forbearance were issued, but on November 30, the board of directors of the Arizona Industrial Development Authority, conduit issuer for the original bonds, approved a second supplemental trust deed for those bonds, after some interviews with board members.
In response to questions from AZIDA board member Gary Naquin, Tim Stratton, bond advisor for the original deal when he was with Rosenfeld Gust and for the new deal on behalf of his own firm, said that Legacy Cares and attorneys “with the bondholder group are in talks about restructuring measures and bondholders are actively participating in these ongoing discussions,” he said minutes of the meeting.
These restructuring activities include a proposed new bond issue which, according to the minutes and disclosure documents of the Trustee, has been subscribed by Loop Capital.
Legacy Cares President Doug Moss advised AZIDA’s board that the forbearance agreement allows access to the $22.3 million debt service reserve fund if needed, according to the transcript.
Stratton, according to the transcript, “said he agrees with Mr. Moss’ interpretation that the project has met a perfect storm — COVID, recession, fears, issues with bid changes and timing, all of which cast a bad shadow on the deal, he said to the best of his ability, that’s the extent of the problems.”
According to the record, Stratton told the AZIDA board that the borrower’s team had discussions with Bryant Barber of Lewis Roca Rothgerber Christie, who was hired by trustee UMB Bank, NA, and that “bondholders are actively participating in these discussions.” .
Barber, who represents the trustee and the holders of 70% to 80% of the debt, confirmed to the board that bondholders are driving these changes and that the amendment is what they want, the minutes say.
“Negotiations between bondholders and the borrower and its manager determined that bondholders are not currently seeking revocation and want these bonds and that they remain tax-exempt,” Barber said, according to the transcript. “The bondholders love the facility, have visited the facility and are very concerned about the impact on the community and they need to be able to write checks to continue to support this project.”
Other complicating restructuring plans include mechanic’s liens filed by contractors who say they will remain unpaid for construction.
Pursuant to an attached legal order an EMMA filing dated November 29 From the bond trustee, the mechanics lien plaintiffs, who have sued in state court, agreed to stay proceedings to give Legacy Cares time to raise a new loan that would provide enough money to meet claims by contractors and others to settle.
“This new loan will refinance current debt, which totals over $280 million,” the court filings said. “If the transaction between Legacy Cares and investment bank Loop Capital goes through, a new loan of at least $400 million will be underwritten as early as January 2023, with a target of closing shortly thereafter.”
The mechanic’s lien case has been stayed until Jan. 31, according to the disclosure filing, with a status conference scheduled for Feb. 16.
“During these discussions, the investment bank has indicated that a potential future refinancing could be conducted on a tax-free basis by the issuer,” the trustee said in its most recent disclosure dated November 29. “The investment bank has said it is working on a term sheet for the proposed repayment, which will be provided to the borrower. The investment bank is working with Bond Counsel to develop a preliminary funding plan.”
Legacy cares were not on the agenda at AZIDA’s last meeting on December 15th. It has not released an agenda for its next meeting, which is scheduled for Thursday.
A new deal with a much higher capital would face a daunting market challenge – the original 2020 unrated bonds with yields of 6.25% to 7.836% at a time when The rates were much lower than today.
There are other odd indicators at the venue.
In a press release issued Wednesday, Bell Bank Park declared its first year a great success, which hosted more than 250 athletic competitions, including high-profile national events such as the Professional Pickleball, Professional Cornhole and USA Gymnastics Championships.
“Of course we’ve encountered some bumps in every major project, but through persistence and a shared vision to make this dream a reality, we’re excited to see this first year behind us and to turn our focus to an even better 2023” said Chad Miller, CEO of Legacy Sports USA.
But acc the interim financial report For the first three quarters of 2022, published on EMMA Nov. 29, event revenue for Legacy Sports USA, LLC even declined for the year, from $7.6 million in the first quarter, 2.5 Millions of under budget, to $2.8 million in the third quarter, nearly $6.5 million under budget.
Legacy Cares was converted from an Arizona limited liability company to a non-profit corporation in January 2020, according to offering documents, the same year it sold $250.8 million in sales bonds through the Arizona Industrial Development Authority. Another $33 million in debt followed in 2021.
Ziegler was the underwriter of unrated bonds 2020 and 2021. Except for $7.3 million, all debt is tax-free.