Holders of bonds sold to partially finance the development of the $93 million National Sports Museum in lower Manhattan are in negotiations with obligor National Sports Attraction LLC following a default.
The New York Liberty Development Corp. sold $52 million of tax-exempt and $5 million of federally taxable bonds in 2006 on behalf of the for-profit company through private placement to qualified institutional buyers under rule 144A.
On Sept. 11, just four months after opening, the borrower disclosed that it was "in default of certain payments under the loan agreement" and was in discussions with bondholders to restructure the terms of the bonds. JPMorgan underwrote the debt, which wa sold unrated and uninsured, and Nixon Peabody LLP was bond counsel.
Queries to the museum were referred to the public relations firm Rubenstein Associates Inc., which confirmed that the museum was in negotiations with equity investors and bondholders but would not elaborate.
The default was reported in the New York Times earlier this week and quoted museum founder and chief executive officer Philip Schwalb as saying: "The conversations have been very positive and helpful to us and are still ongoing, so the ultimate structure is one that the museum will be able to live and thrive within."
According to the offering document, the museum covenanted that it would reach monthly attendance benchmarks totalling 600,000 visitors annually. The museum has reportedly had trouble meeting those attendance benchmarks, which the offering document indicated were on par with the 2006 attendance at the Intrepid Sea-Air-Space Museum.
The tax-exempt bonds are held by 17 institutional investors in various funds, according to Thomson Reuters data. Calls to portfolio managers at some of those funds were either not returned or directed to spokespeople who either declined to comment or did not return calls by press time.
The investor with the largest holding is BlackRock Investment Management LLC, which holds $5.1 million of the bonds in various funds, according to Thomson.
The New York Liberty Development Corp. is a subsidiary of the Empire State Development Corp. The bonds were sold under the federal Liberty bond program intended to revitalize New York City following the Sept. 11, 2001, terrorist attacks.