RED, the developer of the Outlets at Legends in Sparks, Nev., has defaulted on $141 million in private loans used to construct most of the 148-acre retail development, according to published reports.
A company spokeswoman told the Reno Gazette-Journal that the development is going through a strategic foreclosure that will enable it to refinance debt held by nine banks. RED filed a notice of default with Washoe County.
The $141 million in private debt stems from $193 million in construction and bond loans used to finance about half of the $400 million shopping center development near the Sparks Marina.
In addition to the private loans, the project is funded by $116 million in sales tax anticipation revenue, or STAR, bonds and $15.2 million in property-tax backed redevelopment bonds.
As part of the refinancing agreement with the banks, the developer will provide an equity infusion in an undisclosed amount, according to the report.
There was no principal or interest write-down on the loans and the refinancing deal will not affect the debt payments on the publicly financed portion of the project, the report said.
The developer has twice had to draw down reserves to make payments on the STAR bonds, which are backed by 75% of the sales tax collected by the stores in the development.
The use of reserves does not trigger covenant defaults on the bonds. But Moody’s Investors Service has reported that RED, a well-known Midwestern developer, will default on its $82 million of outstanding bonds on June 15, 2020, with about 95% recovery to bondholders through the final maturity in 2028.
Moody’s assigns a B2 rating to the senior STAR bonds, issued by Sparks Tourism Improvement District No. 1. The debt was issued in 2008 with a speculative Ba2 rating.