CHICAGO — The Ramsey County, Minn., board has approved placing a bid for the struggling Vadnais Heights sports complex financed with $27 million of now defaulted bonds.
Bids were due by Sept. 6. The facility was put up for sale at a listing price of $13 million earlier this summer by the trustee who represents bondholders. US Bank NA notified bondholders in July of the plans to place the facility on the selling block but warned that it doesn't expect to make investors whole through the sale.
The city of Vadnais Heights in 2010 sold the bonds through its economic development authority to finance construction of the Vadnais Sports Complex. The city of 12,000 is located outside St. Paul.
The bonds were supported by a lease agreement and repaid with those payments under the pact. As the complex struggled, the city subsidized debt service. The council decided last year it could no longer afford the assistance and cancelled its lease and financial support. The city has argued it was simply exercising its legal rights under the lease agreement.
The decision to renege on the lease, which led to a February 2013 default on debt service, prompted Moody's Investors Service and Standard & Poor's to strip the city of its investment grade general obligation bond ratings.
Bondholders would receive the net proceeds after various fees and expenses are paid in addition to the broker's commission. In 2011, the facility generated $300,000 toward $1.6 million of annual debt service on the bonds that mature in 2041.
Under its master lease agreement, Vadnais Heights is able to decide annually whether to cancel the lease. The complex transaction in April 2010 differed from most lease-backed deals in the state. The city agreed in 2010 to a conduit-like financing in which the Vadnais Heights EDA issued the taxable and tax-exempt bonds on behalf of a nonprofit, CFP Vadnais Heights LLC.