The Sea Research Foundation Inc. failed to make monthly payments to a debt-service fund on $22.7 million of bonds during the first half of the year due to "financial difficulties," according to a material event notice filed last week.
The Connecticut Development Authority issued the bonds in 2007 to refund bonds sold in 1997 on behalf of the nonprofit foundation to renovate and expand the Mystic Aquarium and the Institute for Exploration in Stonington, Conn.
Citibank NA, which provided a letter of credit, made a May 1 payment on the bonds but had not been reimbursed by the foundation, and the bonds' debt-service reserve account has not been replenished, according to the notice.
Under the indenture, the obligor was required to make monthly payments toward principal and interest but failed to do so. The failures did not constitute a default under the indenture because Citibank waived them, as did the trustee, M&T Bank of Delaware, at Citibank's request, according to the notice.
The failures to make payments give Citibank the right to accelerate the maturity of the bonds or to cause their mandatory repurchase under the indenture, but "Citibank has neither done so nor expressed any intention to do so," the notice said.
"The foundation is engaged in discussions with Citibank concerning the foundation's obligations to reimburse Citibank for payments made on the bonds under the letter of credit," the notice said.
Citi and the trustee declined to comment.
"Sea Research Foundation and Citibank are amicably discussing a restructure of Sea Research Foundation's obligation to Citibank," foundation spokesman Peter Glankoff said in a prepared statement. He declined to say why the foundation had missed the payments but said it was a "longstanding situation" and that bondholders were assured of payment.
At the time the bonds were sold, the foundation's primary source of revenue was from grants, contracts and donations totaling $8.6 million in 2006, followed by $8 million from aquarium admissions, according to the official statement. More recent figures were not available.
The debt financed the construction of 30,000 square feet of new visitor facilities, 60,000 square feet of new exhibition space, and the renovation of 60,000 square feet of the existing facility.
The foundation operates the aquarium, which was founded in 1973, and features beluga whales, penguins and sea lions.
The refunding bonds were sold in two series: $16.8 million of tax-exempt bonds and $5.9 million of taxable bonds. The tax-exempt bonds were sold as term bonds with maturities out to 2042 and the taxable bonds were sold as term bonds maturing in 2025.
"Like all other organizations in the nonprofit world, everyone's feeling the pinch," said Karin Lawrence, senior vice president for public finance for the issuer. The trustee, rather than the authority, which is a conduit issuer, was handling the resolution of the aquarium bonds, she said.
Moody's Investors Service and Standard & Poor's rate the bonds A1 and A-plus, respectively, based on the letter of credit.
