The Internal Revenue Service has begun auditing $99.3 million of student housing refunding revenue bonds issued in 2006 by the California Statewide Communities Development Authority.

The audit was disclosed in a material event notice dated Feb. 5 that the borrower - Collegiate Housing Foundation-Irvine LLC - released yesterday to the nationally recognized municipal securities information repositories.

However, CHF said in the notice that it has no reason to assume the audit is anything but routine and that it does not anticipate any adverse impact on the tax-exempt status of the bonds.

CHF said that it and the authority are taking steps to respond to a document request from the IRS, but that the agency told them in a letter that it "routinely examines municipal debt issuances to determine compliance with federal tax requirements," indicating the audit was not initiated due to any specific concerns about the bonds, or as part of any IRS initiative.

The bonds were issued to advance refund $110 million of revenue bonds sold in 2004 to finance a student housing project at the University of California, Irvine, as well as to pay issuance costs, according to the bond documents.

The bonds were used to finance the costs of constructing and equipping a student housing project that would house 1,564 undergraduate and graduate students across roughly twenty-four acres. By the time of the refunding, "many aspects" of the project had been completed, and the facility was expected to be ready for students by the beginning of the 2006 fall term, the bond documents stated.

The refunding bonds were underwritten by the former Lehman Brothers, now Barclays Capital. Orrick, Herrington & Sutcliffe LLP was bond counsel and counsel to the issuer. O'Melveny & Myers LLP was underwriter's counsel. The Bank of New York Mellon Trust Co. was the trustee, and Nixon Peabody LLP served as trustee's counsel.

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