BRADENTON, Fla. — The Baker Correctional Development Corp. in Florida’s panhandle notified bondholders Monday that it entered a forbearance agreement for principal payments due to start next month on $45 million of unrated bonds sold in 2008.
The forbearance agreement delays the nonprofit corporation’s principal payments until Feb. 3, 2013, because the one-story jail built with bond proceeds hasn’t achieved the projected number of inmates that supply the per-diem revenue needed to pay debt service, a jail official said.
The trustee, Bank of Oklahoma NA, has agreed not to exercise remedies under the indenture or other bond documents as a result of the BCDC’s failure to pay debt service. However, all missed principal payments will be due along with the Feb. 1, 2013, principal payment, the forbearance agreement said.
Interest payments started in 2008 and will continue to be made in February and August, according the forbearance agreement, though BCDC dipped into reserves twice last year to make interest payments, according to material event notices filed on the Municipal Securities Rulemaking Board’s EMMA site.
Nearly 100 documents for the credit are posted on EMMA. Most were filed last year.
“We’re very optimistic that things have turned around and we have much a better outlook now,” said Brian Bishop, director of the administration bureau at the Baker County sheriff’s office, which manages the jail for the BCDC, the corporation that sold the bonds.
At the 508-bed facility, jail officials have encountered lower-than-projected inmate counts and higher-than-anticipated start-up costs.
Last year, they reexamined the budget based on lower inmate levels, cut operating expenses, froze unfilled positions, reduced work hours and salaries, and laid off 16 full-time workers, according to reports Bishop sent to the bond underwriter — Bergen Capital, a division of Scott & Stringfellow LLC and an affiliate of BB&T Corp. The reports are posted on EMMA.
Bishop said he believed Bergen banker Jim Swan negotiated the forbearance agreement. Swan could not immediately be reached for comment. Documents on EMMA show that Bishop files required jail reports to Swan.
It is not clear if the jail currently has an outside financial adviser, but Swan told the Baker County Commission in November 2006 that it was not necessary for them to hire a financial adviser to assist in preparing for the sale of the bonds, according to minutes from the meeting. Swan said his firm would serve in that capacity and get paid only on closing of the financing.
Swan worked on a similarly structured deal in lower central Florida with the Glades Correctional Development Corp. Glades hired a financial adviser to review the scope of his assignment and fee, he told Baker County commissioners during the workshop.
Though a large part of the inmate population expected to serve the Baker jail did not materialize as quickly as projected, Bishop said the numbers are improving.
Around 100 beds at the 508-bed facility financed with bonds serve local inmates, while the remainder of the population is mostly dependent on prisoners from federal Immigration and Customs Enforcement, or ICE.
ICE prisoners arrived much slower than Baker had been assured before the jail opened June 14, 2009, and never reached levels that would support debt-service payments until late last year. There is no written agreement with ICE to supply the Baker jail with any inmates. The only agreement in writing concerns the amount of per diem that will be paid per prisoner.
“It’s a roller coaster and day-to-day [the population] will vary a lot,” Bishop said.