The Charitable Leadership Foundation, a nonprofit in upstate New York, has drawn on its debt service reserve and is in default under an installment-payment agreement with the issuer, according to a disclosure notice on the Municipal Securities Rulemaking Board’s EMMA website.
The CLF drew on the reserve fund to make a $1.4 million debt service payment due on Jan. 1, 2011.
The Albany Industrial Development Agency issued $56.5 million of bonds on behalf of the nonprofit in 2002 for the construction of a 150,000-square-foot biomedical research facility in Albany. The debt was issued as term bonds with maturities out to 2026.
The foundation created another nonprofit, the Center for Medical Science Inc., to own and operate the building. According to the official statement, the IDA owns an interest in the facility, which it is selling to the foundation under an installment agreement.
Those installment payments, which were missed in 2010 and in 2011, secure the bonds.
The building’s main tenant, the Ordway Research Institute Inc., is also a nonprofit created by the parent organization. It has not paid rent since July, according to a report from Moody’s Investors Service.
Ordway’s mission is to facilitate collaborative biomedical research for cancer and other health care issues, according to its website. Moody’s said Ordway’s lease payments cover nearly half of debt service on the bonds, which the official statement pegs at $4.6 million in 2011.
In December, Moody’s downgraded the bonds to Caa2 from Caa1 and put it on review for further possible downgrade, citing a “precipitous decline in CLF’s financial resource base and lack of cash or liquid investments.”
From 2007 to 2008, the CLF and the Center for Medical Science saw their combined net assets fall to $26.4 million from $41.4 million, according to audited financial statements. In 2009, they fell further, to $17.3 million. A large part of the drop in assets was from the reduced value of investments, which declined to $3.4 million in 2009 from $17.6 million in 2007.
The CLF guarantees the bonds, but “would not be able to cover any shortfall in upcoming debt service payment if one is needed,” Moody’s said. Analysts also said they were concerned about the timeliness and accuracy of the foundation’s financial information.
The CLF was founded by the late Herbert Liebich, who was one of the founders of the food company Sysco Foods Inc.d. The foundation provides grants for education, housing, and medical projects.
The CLF is run by Liebich’s son, Richard Liebich, who was unavailable for comment on Monday. The institute’s website also lists him as the 2009 chairman and treasurer of Ordway.
