CHICAGO — Branson Airport LLC is pursuing a global settlement that relies heavily on an equity ownership offer to resolve its default on $113 million of bonds issued in 2007 to fund the Ozarks air field built to serve local tourism.
The airport has struggled to generate the revenue needed to repay the bonds as passenger levels and airline interest fell far short of initial expectations. When total expenses are included, the company has reported an overall net loss every year since the airport opened in 2009, according to a December disclosure notice filed on the Municipal Securities Rulemaking Board’s EMMA website.
The airport defaulted on bond terms in 2011 but won a reprieve from any enforcement actions in its first forbearance that year. The trustee stopped making payments in 2012 after dipping into reserves to cover previous payments, although a special payment was made in 2016 from extraordinary funds the airport had received. Extensions and amendments staved off any bondholder action as long as the operators hit specified service and funding targets.
The airport owners last spring began pursuing a “strategic alternative process” and in June hired ICF SH&E as a financial advisor.
Negotiations with bondholders led to the proposal, which is supported by holders of a majority in principal outstanding.
“If consummated, the global settlement would provide bondholders new debt and a majority of the equity in the company in full satisfaction of the existing bonds and related bond documents,” reads the December notice posted by bond trustee UMB Bank NA ahead of a Dec. 19 bondholder call on the proposal, the airport’s recent operational performance, and future business plans.
The settlement offers bondholders a pro rata share of new series A Bonds in the principal amount of $32.5 million and a pro rata share of 65% of the equity in Branson Airport LLC and its affiliates BKG Branson Airport LLC; Branson JetCenter LLC; FlyBranson Travel LLC; and Branson Land LLC.
Holders also can invest in $3 million of new series B bonds and a pro rata share of an additional 23 % of the equity of the airport parties, which would provide working capital for the airport operators' expansion plans. The B series would have a liquidation preference over the new A bonds if the company is liquidated while principal, interest or other fees or charges remain outstanding on the B Bonds, according to the filing.
The settlement would also free the airport of about $18 million of legacy funded subordinate debt with an offer of 12% of equity in the airport parties, which may take the form of warrants.
“The global settlement remains subject to material conditions precedent," the notice read. "It cannot be determined with certainty whether or when the transactions contemplated by the global settlement will be implemented.”
To implement the order, the bond trustee would seek entry of a court order in a trust instruction proceeding. The trustee is represented by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC with William Kannel and Ian Hammel serving as lead attorneys.
The tax-exempt, unrated bonds were sold in 2007 by the Branson Regional Airport Transportation Development District on behalf of private developers. Proceeds funded construction of the airport, which was supposed to boost and benefit from Branson tourism.
The bonds are secured by real and personal property interests held by the company including the company’s leasehold in the airport.
Under the bond indenture, bondholders can demand immediate repayment of all principal and interest, terminate the airport's operating lease, and pursue legal action to capture revenue in the event of a default. In the event of an ongoing state of default, they also could eventually move to foreclose on the property.
Branson primarily operates through charter flights after losing service from Southwest Airlines and Frontier Airlines in 2014.