The Clay Gas Utility District of Clay County on Tuesday filed a notice saying that it hopes to make a tender offer for some or all of its bonds, which are in default.
The troubled district sold $3.25 million of unrated, uninsured gas system revenue bonds in 1998, with serial maturities between 1999 and 2007, and term bonds in 2012 and 2017.
Proceeds were used to buy equipment and install a natural gas distribution system, fund capitalized interest and a debt-service reserve, and pay issuance costs.
The district has not made principal and interest payments on the bonds since 2000.
"The tender offer will be made pursuant to a written offer to purchase that will be provided to the holders of the bonds together with other documents relating to the tender offer," a notice filed with the Municipal Securities Rulemaking Board's EMMA online filing system said.
The notice did not provide specific details about the terms of the offer or proposed purchase price. It said the district expected to make the tender offer by Sept. 15. Morgan Keegan & Co. is the agent for the potential tender offer.
Last fall, the Tennessee Utility Management Review Board ordered the district to explore methods of restructuring its debt to resolve its ongoing financial difficulties.
Ray Norris, president of the Clay Gas Utility's board of commissioners, said then that the district was trying to properly size the debt with the size of the business. The district owed $4.7 million just from missed principal and interest payments, he said.
Norris said the district has had difficulties because Clay County is distressed and suffers from high employment. The gas district, which is aligned with the county, was projected to have 600 customers upon startup.
But Norris said the well-publicized legal problems of a project manager who went to prison for embezzlement was "a killer" for the district as it tried to lure new customers.
The gas district had around 198 customers last year.
