LOS ANGELES — Bondholders could receive a 28% to 30% recovery on Nevada County, Calif. dirt bonds that a developer defaulted on 23 years ago, according
The Wildwood Estates Communities Facilities District, formed in 1990, issued $9.1 million in community facilities district bonds to finance infrastructure for a proposed 559-unit residential development on 282-acres 70 miles northeast of Sacramento.
The unrated Nevada County Community Facilities District No. 1990-1 bonds were secured by a special assessment tax.
Soon after the CFD was formed, the property owner experienced financial problems and abandoned the project, according to court documents. The developer not only failed to complete work on the infrastructure, but also filed bankruptcy and failed to pay the special taxes needed to cover the annual debt service on the bonds.
The bonds went into default in 1992 and bondholders have not received principal or interest payments since 2002, according to EMMA filings.
The Aug. 14 EMMA filing served as notice to bondholders that U.S. Bankruptcy Judge Robert Bardwil has scheduled a hearing for Sept. 9 to approve sending ballots to bondholders to vote on the plan of adjustment in a bankruptcy case stemming from the bond defaults. The plan of adjustment was filed Aug. 10.
The total outstanding principal amount of the bonds is $4.8 million; CFD 1990-1 estimates that at least $1.35 million will be available for distribution to bondholders, according to the EMMA filing.
If Bardwil issues a favorable ruling, ballots would be sent out within 14 days of the Sept. 10 ruling and bondholders would be given 35 days to respond. The same deadline would apply to anyone wishing to object to confirmation of the plan of adjustment.
Stakeholders in the community facilities district asked the judge to schedule a hearing in November to confirm the plan of adjustment if all goes according to plan.
The Nevada County Board of Supervisors; Wildwood Resolution, LLC, the current owner of the property; and Nevco Land Acquisition, LLC, the new purchaser of the property reached a settlement agreement on April 28 laying the groundwork for a plan of adjustment in the bankruptcy case.
Bondholders holding a majority of the delinquent bonds also reached an agreement in principle at the time the settlement agreement was struck.
"We are very pleased to finally have a solution that will repay both the bondholders and the county at least a portion of the money owed to them, and lift the burdens that have plagued this property for over 22 years," County Supervisor Hank Weston said in a prepared statement at the time of the settlement.
To implement the settlement, county supervisors authorized CFD 1990-1 to commence a voluntary
Nevco has agreed to purchase the property, known as Phases II and III of Wildwood Estates, for the appraised value of the land once it is clear of all delinquent taxes, assessments and bond debt.
The money paid by Nevco will be used to make payments to the bondholders, pay the principal on delinquent property taxes and assessments and pay costs and attorneys' fees associated with implementing the settlement agreement. The CFD also filed Chapter 9 bankruptcy as part of the agreement.
In the years since the developer abandoned the project, the county, acting on behalf of CFD 1990-1, has conducted foreclosure sales and implemented several work-out plans to restructure and/or refinance the defaulted bonds. While its efforts did return some principal and interest of bondholders and allowed Phase 1 of the project to be developed, there have never been sufficient resources to fully repay the bondholders and the ongoing administrative expenses associated with operating the development, according to county officials.
No payments on the interest or principal of the bonds have been made since 2002. The county has, however, funded some of the administrative costs of the CFD.
