CHICAGO — The Lombard Public Facilities Corp. in Illinois has extended to April 14 its tender invitation to holders of $144 million of revenue bonds issued to help finance its hotel and conference center to give bondholders more time to review its restructuring proposal.
The agency, set up by the village of Lombard to finance and own the project, had set a March 31 deadline on the tender invitation extended to holders of its various Series A and C bondholders who are paid from project revenues. Another $43 million of Series B bonds issued for the project carry the village’s appropriation pledge and were not included in the tender.
Piper Jaffray & Co. is serving as the dealer agent and Bondholder Communications Corp. is the tender agent.
Lombard will fund the tender primarily through the sale of refunding bonds and hopes to enhance their marketability by attaching an appropriation pledge, which garnered the bonds a AA-minus rating from Standard & Poor’s. The restructuring bonds will extend by three years the final maturity on the original bonds.
The tender offers holders $670 per $1,000 principal, plus accrued interest, for the $63.9 million Series 2005A-1 and the $54 million Series 2005A-2. It offers $200 per $1,000 principal, and no accrued interest, for the $6 million Series 2005C-1, $9.7 million Series 2005C-3, $5 million Series 2006 C-3, and $1.8 million series 2006C-3.
A successful tender based on Lombard’s restructuring plan requires 75% participation of the A holders and 100% participation of the C holders. The refunding deal includes a Series A for $63.5 million of conference center and hotel first-tier refunding revenue bonds and a C series of third-tier refunding revenue bonds for $6.9 million.
Without a restructuring, village officials warn that substantial debt-service shortfalls loom and the failure to finance management and capital expenses could hurt the project’s viability, resulting in further shortfalls.
The original bonds financed development and construction of a 500-room Westin Lombard hotel, which includes a 55,500-square-foot conference center, a parking structure, and two full-service restaurants.
The facilities opened in 2007 but have struggled to meet original revenue projections amid a tourism slump, forcing officials to dip into reserves to fully cover recent debt-service payments. The trustee drew about $1 million from operating reserves to fully cover the January debt-service payments owed on the Series A and B bonds. None of the debt payments owed on the 2005 and 2006 C bonds were made.
“The restructuring reduces annual debt service and is a better fit for the project’s revenues,” said Lombard finance Tim Sexton director.
The restructuring significantly boosts the project’s potential burden on the village, as it will be on the hook to repay the $70 million of restructuring bonds in addition to the $43 million Series 2005B, but Sexton said it still provides the best option.
“Yes, we will be taking on more risk, but we are reducing the chances that the village will be called upon” to make up a shortfall in project revenues, he said.
After announcement of the tender last month, Standard & Poor’s lowered its issuer ratings on the LPFC bonds to CC from B-minus and assigned a negative outlook. The agency downgraded Lombard’s issuer credit rating one notch to AA with a negative outlook in December.