DALLAS - Holders of $23 million of defaulted bonds backing a private prison in Encinal, Texas, would receive 40 cents on the dollar under an offer posted on the Municipal Securities Rulemaking Board's EMMA
Bondholders have until Oct. 30 to accept the offer, according to a notice from tender and information agent Globic Advisors. U.S. Bank National Association is the trustee.
The prospective buyer of the debt has not been identified, according to Robert Stevens, who represents Globic. But an agenda for the LaSalle County Public Facilities Detention Corp. indicated that the offer came through Hamlin Capital Management.
The detention center in LaSalle County is near the border of Mexico in South Texas.
Another Texas county, Burnet County in Central Texas, recently bought a privately operated detention facility after the operator left town. The once-private jail now serves as the official county jail. Burnet County in July paid 55 cents on the dollar for the jail financed with $35.4 million of bonds.
The LaSalle PFC is a legally separate entity from La Salle County, though County Judge Joel Rodriquez and the county commissioners double as the board for the PFC.
The county took over operations of the 668-bed facility in December after private operator Emerald Correctional Management cancelled its contract, leaving the lockup in need of repairs before it could reopen. To finance the repairs, the PFC sought forbearance on the debt and served notice that it could not pay bondholders the full amount due.
According to the notice posted on EMMA, monthly average occupancy of the detention center for July was 171 inmates. The monthly average occupancy for August was 233 inmates, which is about 33% of the full occupancy. That is insufficient to pay the full amount of debt service due on the bonds, according to the notice.
The original bonds used to finance construction were refunded March 1, 2010 with $11.86 million of taxable term bonds paying 9.5% interest and $11.1 million of tax-exempt with 7.5% coupons.
The tax-exempt bonds have fallen from 70 cents on the dollar Jan. 1 to 40 cents as of July. The taxables traded in July at 35 cents, up from a low of 19 cents in April, according to the notice.
The detention center was built to house inmates for the U.S. Marshal's Service, including immigration detainees but has been used for other types of inmates since Emerald cancelled its contract.
