CHICAGO — Bank of America NA sued the St. Louis-based Jewish Community Center last week, alleging the nonprofit has withheld more than $4 million it owes the bank as a tactic to win more favorable terms on the repayment of $45 million of bonds held by the bank.
The bank filed the complaint Thursday in U.S. District Court at St. Louis. Bank of America contends that the organization has sufficient operating cash reserves to make good on the $4 million it owes on a line of credit and bond payments.
“JCC is withholding these payments in a calculated effort to force Bank of America either to restructure a $45 million loan to JCC on terms far more advantageous to JCC than originally negotiated, accepted, and agreed upon by the parties or to accept a substantial discount on this $45 million loan,” the lawsuit states.
The bank purchased the $45 million tax-exempt, variable-rate issue in a private placement in 2007 with the Missouri Development Finance Board serving as conduit issuer. The board’s executive director, Robert Miserez, said it had not yet been notified of the lawsuit.
Bank of America issued a statement saying only: “We have been working with the Jewish Community Center to help them resolve their financial issues.” JCC did not return a call for comment.
Bond proceeds financed improvements at two JCC facilities in the St. Louis area. UMB NA served as trustee.
The lawsuit suggests that JCC has withheld the payments citing “future financial uncertainties” and suggests that the center’s capital campaign contributions, property sales, and operational cash flow have fallen short of expectations.
Bank of America said it has attempted to reach an “acceptable resolution” to no avail, prompting the lawsuit that asks the court to force JCC to repay a $2.5 million line of credit opened in 2006 and payments owed on the bonds.
The line of credit came due last September.
JCC was required to pay down $785,000 of the bonds in December 2010 and another $825,000 in December 2011. JCC failed to pay off those amounts, adding to past due amounts owed to Bank of America.
As of last month, JCC owed the bank about $4 million, including $1.6 million from the 2007 issue and $2.5 million from the line of credit, according to the lawsuit. The bank contends that JCC has sufficient unrestricted cash to make the payments and that it’s current on all other debts.
“Bank of America is being singled out for non-payment,” the lawsuit reads.
The complaint charges JCC with two counts of breach of contract. On the overdue debt service, Bank of American asks the court to order JCC to abide by the bond terms and redeem the $1.6 million.
Technically, the bank cannot pursue a monetary damage claim directly against the center with respect to the bond issue because it is not a party to the bond indenture.