Wells Fargo Bank N.A. on Tuesday notified investors holding the defaulted bonds of three Georgia charter schools that they will lose about 22.7% of their outstanding principal after selling the real estate that was collateral for the debt.
Of the $18.93 million in original principal outstanding, $4,295,689 will not be paid and the bonds will be cancelled, said Wells Fargo, the trustee. Funds from the sale of the land and funds held in the trust estate were to be distributed this week, and applied toward accrued interest.
The Development Authority of Alpharetta, Ga., sold $18.9 million of bonds in 2011 so the Fulton Science Academy, Fulton Educational Services and Fulton Sunshine Academy could co-locate their elementary, middle and high school operations on a single campus.
The suburban Atlanta charter schools used bond proceeds to acquire 44 acres and build a 100,000-square foot facility for the suburban Atlanta charter schools. The site had been cleared and about one-third of the building foundation was built by the time work stopped.
Wells Fargo declared the bonds in default in May 2012 because the schools failed to disclose ongoing problems with the renewal of Fulton Science Academy's middle school charter, which ultimately was not renewed by the Fulton County School Board because of operational and financial questions.
Maintaining all three charter schools was required in bond documents because pass-through funds from the school board that were tied to student enrollment secured the bonds.