BRADENTON, Fla. – Bank of New York Mellon has accelerated about $116 million of toll revenue bonds due to ongoing defaults by Florida’s Santa Rosa Bay Bridge Authority.
The principal on all the outstanding bonds is due immediately, the trustee said in a notice posted on the Municipal Securities Rulemaking Board EMMA website Wednesday.
The storied Bridge Authority in 1996 sold $75.5 million of uninsured current-interest term bonds maturing in 2028, and $19.4 million of capital appreciation bonds maturing in 2022, to build the 3.5-mile Garcon Point toll bridge in northwest Florida. The bonds had investment-grade ratings when they were sold.
However, the bridge never met traffic projections, and most bond payments were supplemented with reserves over the years until the first default occurred July 1, 2011.
“The authority had not made payments on the bonds since the middle of 2011, and various events of default have occurred and are continuing to occur,” said BNY spokesman Kevin Heine. “In order to protect the interests of bondholders, we exercised our right to accelerate the bonds, meaning that the bonds become immediately due and payable.”
“That will allow us to make regular distributions to all bondholders from the revenues made available to us as trustee,” Heine said.
Acceleration of the principal allows the trustee to take all of the toll road revenues, and make payments to bondholders as revenues become available, according to bond attorney Michael Wiener, a partner at Holland & Knight. “They don’t have to call events of default on each payment date.”
Wiener said other remedies may be available, including the ability of a majority of bondholders to exercise their rights and direct the trustee.
“The trustee, right now, is acting on behalf of all bondholders and has a fiduciary duty to do what is in the best interest for all bondholders,” he said. “Now everything is due and it may make it easier to restructure all of the bonds.”
Accelerating the bond payments may also require insurers to make immediate payments, instead of waiting until the bonds mature, he said.
A portion of the debt was insured in the secondary market by several different bond insurers.
Acceleration of the bonds took some Bridge Authority board members by surprise, including the chairman, Morgan Lamb, who said he was inquiring into the matter.
The board has not met in several months due to the lack of a quorum, and at least two members resigned recently. No meetings are currently scheduled.
Questions also have been raised about whether liability insurance will continue to be provided by the trustee for board members since all the authority’s funds go to pay debt service. The trustee paid for insurance last year.
“My resignation will be on the table if we don’t have insurance,” board member Jerry Goldstein said Thursday.
Without funds to operate, he said the board can do very little to take action at this point.
“There’s no money and there’s no direction,” Goldstein said. “Quite frankly, I’m not sure what this board really can do in terms of direction.”
For bondholders, the acceleration means that those holding capital appreciation bonds, which are issued at a discount, will likely receive fewer payments than if they were left outstanding until maturity, a market expert said.
Current interest bondholders would receive interest payments first, then principal payments if funds are available.
In its market notice this week, BNY Mellon said it did not make Jan. 1 bond payments because of the acceleration of the principal payment, and bondholders will be notified about how future distributions of revenues will occur.
The bonds now are rated D by Fitch Ratings and Standard & Poor’s. Moody’s Investors Service withdrew its Ca rating last year saying it had inadequate information to support the maintenance of a rating.