The Internal Revenue Service is auditing the bonds of two issuers based in Florida — a health care provider and a community development district.
Both audits were disclosed last week in event notices the borrowers filed with the Municipal Securities Rulemaking Board’s EMMA system.
The Coral Gables Health Facilities Authority said the IRS informed it, in a Jan. 24 letter, that it planned to audit $149.9 million of revenue bonds the authority issued for Baptist Health South Florida in 2004.
The authority issued $23.6 million of variable-rate bonds, $47.6 million of term-rate bonds, and $78.7 million of fixed-rate debt to finance the acquisition of Doctors Hospital, a 281-bed hospital in Coral Gables.
The bonds were wrapped with an insurance guarantee from Financial Security Assistance Inc., which in July 2009 merged with Assured Guaranty Corp.
The authority refunded all of the tax-exempt debt in 2007 and issued about $273 million in new-money for projects.
Merrill Lynch & Co. and Banc of America Securities LLC, now Bank of America Merrill Lynch, were co-underwriters on the deal. Jones Day served as bond counsel for Baptist Health and Hawkins Delafield & Wood LLP represented the underwriters.
Baptist Health has hospitals and other health care services in Miami-Dade, Broward and Monroe counties. In November, Standard & Poor’s upgraded it to AA from AA-minus, noting the health care providers strong business position in the region.
Meanwhile, the South Village Community Development District in Clay County, located south of Jacksonville, said it received audit letter from the IRS in early April for $26.6 million of unrated capital improvement revenue bonds issued in 2005 to finance a 1,325 acre project.
The district partnered with a developer, Eagle Landing LP for the project.
The bonds were to be backed by payments from development projects funded by the 2005 bonds. As of Dec. 31, 2010, there district had $24.6 million of bonds outstanding.
Prager, Sealy & Co. underwrote the bonds. Nabors Giblin & Nickerson PA was bond counsel.
The IRS has an initiative underway to audit developer-driven transactions.
The agency said it in its letter that it had no reason to believe that the debt failed to comply with tax laws and rules.
According to South Village’s fiscal 2009 financial statements, audited in September 2010, the issuer had a $11.8 million budget shortfall for the year ending Sept. 30, 2009. For the year, South Village paid $1.5 million in interest and repaid $410,000 of outstanding long-term bond principal.
On April 13, $4.04 million of South Village bonds changed hands for 75.5 cents on the dollar, according to secondary market activity posted on the Municpal Securities Rulemaking Board’s EMMA system.
The bonds traded for about 72 cents on the dollar in May 2010.