Wells Fargo Bank NA said in a market notice that it would not distribute Jan. 1 interest payments due on $18.93 million of uninsured, defaulted bonds sold for three popular Georgia charter schools.
The bonds were sold in late 2011 by the Development Authority of Alpharetta, Ga., on behalf of the Fulton Science Academy Inc., Fulton Educational Services Inc., and Fulton Sunshine Academy.
Bond proceeds were to be used to build a campus and co-locate the middle, high school, and elementary charter schools in a suburb of Atlanta.
Wells Fargo, trustee for the bonds, said it foreclosed on the property Dec. 26, and that a sale is expected to be held by the Fulton County sheriff's office on Feb. 5.
The trustee will provide a notice to bondholders after the foreclosure sale, which will detail the amount realized in the foreclosure sale as well as the date and amount of a distribution on the bonds, according to a notice on the Municipal Securities Rulemaking Board EMMA website posted Friday.
On Dec. 17, Wells Fargo filed a suit in federal court for breach of contract against the three charter schools claiming that it is owed more than $75,000 under the terms of a note with them, plus attorney's fees.
The trustee is also seeking compensatory and actual damages.
The school building project began to unravel last year after the Fulton Science Academy lost its charter from the Fulton County School District when questions were raised about finances and operations.
The bonds received the investment-grade rating of BBB from Fitch Ratings when they were sold, but the rating was withdrawn at the request of charter school officials.
