The Internal Revenue Service has completed an audit of $51.1 million of auction-rate securities the Orange County, Fla., Health Facilities Authority issued in 2005 for an Orlando health care provider without changing the tax-exempt status of the bonds.

The ARS were retired in May 2008 when the authority issued $48.4 million of fixed-rate, health facilities revenue bonds.

The issuer filed an event notice with the Municipal Securities Rulemaking Board’s EMMA system Monday that said the IRS notified it that the audit was complete in a Sept. 6 letter.

The IRS tax-exempt bond office informed the issuer it was being audited in December 2010.

In the 2005 transaction, the authority loaned $34.1 million to the Orlando Regional Healthcare System for a current refunding of 1993 bonds.

Another $15.1 million was used to help finance the expansion of the Arnold Palmer Hospital for Women and Children. a 158-bed pediatric hospital facility located in Orlando.

In addition, $4 million was placed in a debt-service reserve fund and $2.1 million was spent on issuance costs, according to bond documents.

The 2005 deal was part of a series of transactions that date back to the 1980s and involve at least two past crossover refundings, a type of advance refunding in which the revenue stream originally pledged to secure the refunded bonds continues to be used to pay debt service on the refunded bonds until they mature or are called.

At that time the pledged revenues “cross over” to pay debt service on the refunding bonds and escrowed securities are used to pay the refunded bonds.

During the period when both the refunded and the refunding bonds are outstanding, debt service on the refunding bonds is paid from interest earnings on the invested proceeds of the refunding bonds.

Bradley S. Waterman represented the authority before the IRS.

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