Regional News

Oregon Aquarium Flounders

ALAMEDA, Calif. — Less than six years after Oregon Coast Aquarium bondholders agreed to a substantial haircut to keep the nonprofit out of bankruptcy court, the facility is again struggling with its debt service requirements.

Trustee U.S. Bank NA issued a notice of default in December after the aquarium failed to make the full scheduled monthly payment to the debt service fund for its $12.965 million of revenue bonds issued in 2005 using the Oregon Facilities Authority as a conduit.

No payments due to bondholders have been missed, and an aquarium officials says that won’t happen.

Rick Goulette, the aquarium’s chief financial officer, said that in the wake of poor attendance in the summer of 2010, the organization is regrouping financially, taking actions that include a 12-month holiday on debt service payments that apply to principal.

“We continue to pay interest on the bonds, so bondholders are not out anything,” he said Tuesday in a phone interview.

The aquarium’s first scheduled principal payment is in 2014. Goulette said the aquarium — which has also cut staff and imposed unpaid furloughs — intends to make up the principal payments by then.

The bond indenture calls for the aquarium, a 501(c)(3) nonprofit, to make monthly payments to the trustee of $83,820. Between December and February, the aquarium has only paid $55,000 every month, the trustee reported to the Oregon Facilities Authority in a document dated Feb. 23.

The aquarium has made a formal forbearance request, U.S. Bank reported in the same document.

The 2005 bond issuance came out of the aquarium’s struggles to pay the 1998 revenue bond issue that financed an expansion of the Newport, Ore., facility.

The aquarium defaulted on that issue in 2002, and bondholders, facing the threat of Chapter 11 bankruptcy, ultimately agreed to tender their defaulted bonds for replacement bonds with maturities 12 to 15 years later than the original debt.

The 2005 bonds, issued unrated, paid coupons ranging from 4.3% for the 2014 maturity to 5.6% for 2026 term bonds.

When those bonds hit the secondary market in the summer of 2005, they traded at roughly 55 cents to 65 cents on the dollar, according to data posted on the Municipal Securities Rulemaking Board’s EMMA website.

By mid-2010, the authority’s debt was trading above the 80-cent level, though values dropped in the wake of the default disclosure, with the 2031 maturity changing hands at about the 50-cent level in January.

The aquarium was briefly catapulted into prominence when Keiko, the orca star of the movie “Free Willy,” spent two years at the facility preparing for his release in the wild.

Attendance dropped after Keiko was released in 1998, and the subsequent expansion was plagued with cost overruns and scandal after the organization’s former president took on $2 million in bank loan debt without the board’s approval. She ultimately pleaded guilty to forgery charges.

Goulette pins the aquarium’s current financial woes on the recession; Oregon’s unemployment rate has been above 10% since 2009.

The problems are exacerbated by the aquarium’s location in Newport — the coastal community is more than 130 miles from the state’s population center in Portland, over a route that includes winding two-lane highways.

“Gas prices aren’t helping us, either,” Goulette said.



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