The Clay County, Tenn., Gas Utility District has again extended and modified its tender offer.

The district, which extended its tender offer twice before, now says its offer will expire March 22.

The new offer is contingent upon 75% of bondholders’ acceptance. The previous offer said 90% participation was required.

The district is still offering to buy back its bonds for 10 cents on the dollar.

“The purchase of only 75% of tendered bonds would leave the district with approximately $812,500 in outstanding principal amount of bonds,” according to a notice last week.

“The district does not expect that it would be able to fully and timely pay debt service on this principal amount of bonds, and expects that it would be required to pursue a subsequent tender offer for all or some portion of the remaining bonds.”

A subsequent tender could offer to buy back bonds at more, or less, than 10 cents on the dollar, the notice said.

Bondholders who intended to participate under previous terms can withdraw their tendered bonds, the notice said. Bonds not withdrawn are subject to the new terms.

The rural utility district sold $3.25 million of unrated, uninsured bonds in 1998 to build a natural gas distribution system and fund capitalized interest.

Only $110,000 of principal was ever paid with bond proceeds in the early years.

Currently, $3.14 million is outstanding in maturities between 2001 and 2017. The district has not paid any principal or interest since June 1, 2001.

The original bonds were sold by a division of Morgan Keegan & Co., which is the dealer for the tender offer. Morgan Keegan holds about 25% of the outstanding principal, which it plans to sell in the tender offer.

The gas district, located in northeastern Tennessee, was beset by financial problems from the beginning, including a project manager who went to prison for embezzling $200,000 one year after the bonds were sold.

Some 600 customers were projected at startup, but the district’s customer base never grew after the embezzlement. It currently has 220 customers.

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