DALLAS - Officials from Colorado's Ocean Journey Aquarium announced Monday that they expect by the end of the year to finalize an agreement with investors who hold $57 million of defaulted revenue bonds issued for the facility in 1997.
"We had a very good meeting in Denver with bondholders a few weeks ago and are in constant touch with them by telephone," said Denver attorney Carl Eklund, who represents the aquarium. "I think it's a fair statement that most of us agree that keeping Ocean Journey open would be in the best interest of all concerned. The question is what kind of debt Ocean Journey can sustain and how value can be made available to the bondholders. We are looking at all the ramifications of those questions."
Officials said that while it was premature to release information about the negotiations, there has been an open dialogue between Ocean Journey and bondholders since the aquarium opted to pursue Chapter 11 bankruptcy protection in April rather than close its doors.
"There's a recognition on everybody's part that no one person has the best solution for this situation, so there's a concerted effort on the part of everyone involved to work together toward a positive outcome," said Ocean Journey president Doug Townsend. "I can't address what we are discussing, but I am fairly confident we will have a reorganization plan filed by Dec. 31. We are definitely moving forward."
One bondholder said he thought it was premature to discuss details of the negotiations, but he said he also believes that at least a verbal agreement can be hammered out between bondholders and aquarium officials by the end of the year.
The Denver-based aquarium in 2001 defaulted on the revenue bonds that were issued by the issuer now known as the Colorado Education and Cultural Facilities Authority. The unrated bonds were sold as high-yield securities with interest rates of 8.375%. About two-thirds of the bonds are held by Putnam Investments, with Delaware Investments holding the second-largest block of the aquarium's debt.
Ocean Journey also owes approximately $6 million to the city and county of Denver, which in 1997 guaranteed a $6 million U.S. Department of Housing and Urban Development loan for the facility. The HUD loan was granted for the project for its potential for redevelopment and job creation.
Eklund said he keeps in touch with the city about the loan, but he added that it was premature to try to develop any plan for repaying it.
"It's a sequential process," he said. "The bondholders are holding 10 times more Ocean Journey debt than the city, so we have to work with them first. Once we reach an understanding with the bondholders, we will have a better idea about what we'll be able to do regarding the city's loan. It's a step-by-step process."
Longtime Denver investment banker Walter Imhoff, a senior vice president of the Hanifen Imhoff Division of Stifel Nicolaus & Co., said he has heard about a number of possible reorganization scenarios for Ocean Journey.
"A lot of the bondholders are mutual funds and bond funds," he said. "They are reluctant to show any type of loss to their investors. They could lower the interest rate to 4% or 5% -- which is still a current interest rate, though more in line with rated bonds -- and stretch out the payment schedule. That would lower the payments and give the aquarium what it needs -- a couple of years to allow it to get back on its feet."
He said that aquarium officials would likely continue to search for additional revenue streams, such as debt service assistance in the form of a share of taxes collected by Denver's Scientific and Cultural Facilities District, which collects a portion of city and county sales taxes for museums and other cultural facilities. Imhoff said he believes the aquarium will continue to pursue that funding option despite the fact that the district denied a similar request last year.
"The worst alternative would be for the bondholders to accept a few cents on the dollar, although that would be the best solution for the aquarium," he said. "I'm not sure the bondholders have reached that point yet."
