The Internal Revenue Service is auditing $378.15 million of Series 2007A gas supply variable-rate revenue bonds and $4.82 million of Series 2007B gas supply fixed-rate subordinated revenue bonds issued by the Lower Alabama Gas District in September 2007.
The IRS notified the district about the audit in a June 29 letter. The district disclosed the letter in an event notice it filed with the Municipal Securities Rulemaking Board’s online EMMA system on Friday.
The issuer said the notice indicated that the bonds had been selected by the IRS for a routine examination. It was accompanied by a document request, according the EMMA notice.
The bonds were issued to finance the acquisition of a prepaid supply of natural gas to be delivered to the district in specified quantities over a 20-year period, according to bond documents. They were also issued to fund certain deposits into a debt service fund established under the indenture. The Bank of New York Trust Co. serves as trustee.
The Series 2007A bonds were called and redeemed earlier this year.
The Lower Alabama Gas District is a public corporation formed by the cities of Jackson and Evergreen, Ala. It was set up as a joint-action gas supply agency for the purpose of acquiring long-term natural gas supplies for sale to the Clarke-Mobile Counties Gas District.
Bradley Arant Rose & White LLP was bond counsel. Bank of America Securities LLC, now Bank of America Merrill Lynch, was co-underwriter with the Frazer Lanier Co.
Separately, the IRS closed an audit without changing the tax-exempt status of $55.1 million of general obligation bonds, issued by the Cumberland Valley School District in July 2005.
“If the need to open another examination arises on this bond issue, any change resulting from the future examination may affect all open years of bondholders from the issue date of the bonds,” the IRS wrote in the letter.