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CONSIDERATION OF A RESOULUTION AUTHORIZING THE AMENDMENT OF THE SEDGWICK COUNTY, KANSAS TAXABLE INDUSTRIAL REVENUE BONDS, SERIES A, 2000 (UNITED WAREHOUSE COMPANY); TAXABLE INDUSTRIAL REVENUE BONDS, SERIES A, 2002 (UNITED WAREHOUSE COMPANY); AND TAXABLE INDUSTRIAL REVENUE BONDS, SERIES 2006 (UNITED WAREHOUSE COMPANY).
Presented by: Irene Hart, Director, Community Development.
RECOMMENDED ACTION: Adopt the Resolution and Authorize the Chairman to sign.
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The County has previously issued its (i) Taxable Industrial Revenue Bonds, Series A, 2000 (United Warehouse Company) in the original aggregate principal amount of $4,500,000 (the “Series A, 2000 Bonds”) and its Subordinated Taxable Industrial Revenue Bonds, Series B, 2000 (United Warehouse Company) in the original aggregate principal amount of $500,000, (ii) Taxable Industrial Revenue Bonds, Series A, 2002 (United Warehouse Company), in the aggregate principal amount of $3,500,000 (the “2002 Bonds”), (iii) Subordinated Taxable Industrial Refunding and Improvement Revenue Bonds, Series 2005 (United Warehouse Company), in the aggregate principal amount of $975,000 (the “2005 Bonds”), and (iv) Taxable Industrial Revenue Bonds, Series 2006 (United Warehouse Company), in the aggregate principal amount of #3,450,000 (the “2006 Bonds”) all for the benefit of United Warehouse Company (the “Company”) and all in connection with the purchasing, acquiring, constructing, equipping and making of various additions to a distribution center/warehouse.
The Series A, 2000 Bonds, 2002 Bonds and 2006 Bonds (the “Parity Bonds”) are all issued on a parity with each other, while the 2005 Bonds are subordinated to the Parity Bonds.
The Company has had some financial difficulties resulting from the recent relocation of certain large manufacturing customers. The Company has been unable to keep its payments current and the Bonds are currently in default. The owner of the Parity Bonds, Midwest Independent Bank, has agreed to modify the terms of the Parity Bonds to reduce the debt service on the Parity Bonds in order to provide some relief and allow the Company to cure existing defaults. The proposed amendments to the Parity Bonds include (1) changing the interest rate on the Parity Bonds (8.59% to 4.25% in the case of the 2006 Bonds), (2) extending the maturity and amortization of the parity Bonds, (3) creating additional financial reporting requirements to the Owners of all Bonds, and (4) changing the terms of the Tent’s option to purchase unimproved portions of the trust estate.
Analysis: The above mentioned amendments to the Parity Bonds will lessen the debt service and hopefully allow the Company to continuing servicing the debt, with a decreased chance of default. The amendment transaction will also require the Company to pay current both the Parity Bonds and the 2005 Bonds. The amendments will have little to no effect upon the County and will not affect any tax abatement previously given or grant any additional tax abatement.
Alternatives: The Board of County Commissioners has the option of (1) adopting the Resolution, or (2) denying the request.
Financial Considerations: Property taxes on certain portions of the Project have been abated pursuant to the Parity Bonds. As noted above, the amendments will not affect any tax abatement previously given or grant any additional tax abatement. The proposed amendments will not impose any obligation on the County pay the principal of, premium or interest on the Bonds. The Corporation will pay any and all costs associated with these amendments.
Policy Considerations: The Company and the Parity Bond owner have agreed to these proposed amendments in order to alleviate debt service pressure upon the Company and attempt to cure existing defaults. The County’s policy should favor this type of mutual workout to avoid more devastating financial economic results.
Outside Attendees: Yes
Multimedia Presentation: No