Suburban Chicago hockey arena trustee distributes sale proceeds

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CHICAGO — Holders of $20 million of unrated bonds issued to build a state-of-the-art ice rink complex in the Chicago suburbs received $3 million from the $10 million sale of the facility.

“The distribution will be made available to holders of the bonds on April 26, 2019, to holders of record on April 24, 2019,” read a notice from Bond trustee UMB NA.

The size of bondholders’ loss is not yet determined, as UMB said an additional distribution from other sources still looms. The bonds most recently traded in March at 25 cents.

Leafs Ice Centre in West Dundee, 40 miles northwest of Chicago, has three full-size ice rinks, additional training facilities, a pro shop and a restaurant.

UMB began marketing the facility for sale late last year and later notified bondholders of a stalking horse bidder and planned auction with a deadline of March 5 for competitive bids. The sale — approved by the Probate Court for Hennepin County, Minnesota — to Ice Sports West Dundee LLC closed March 19.

The payment of various commissions, title insurance fees and charges, and real estate estates trimmed the net proceeds to $8.95 million, $6.1 million of of which was used to cover prior and superior lien expenses owed on a loan, counsel and trustee fees, leaving $3.15 million to be distributed to bondholders on a pro rata basis. About 70% was earmarked for principal and 30% for interest.

“There will be another distribution from the arbitration set aside after the arbitration claim is resolved,” UMB reported referencing a $347,000 claim it is pursuing related to a lease dispute. The trustee is holding $110,000 from the sale proceeds to cover potential expenses.

The Illinois Finance Authority issued $18.9 million of tax-exempt revenue bonds and $1.1 million of taxable bonds on behalf of borrower LHC LLC in 2007 to finance construction of the facility.

The last debt service payment on the bonds was made in 2012. No interest or principal has been paid on the bonds since the trustee took title through a special-purpose entity. The trustee has used revenue to pay down the senior loan provided by Externa Funding LLC. The loan was taken out in the form of trustee certificates to cover trustee costs.

The tax-exempt bonds paid interest rates of between 5.6% and 6% while the taxable tranche paid 9%. The nonprofit Leafs Hockey Club guaranteed repayment of the bonds. The LLC that borrowed the money on behalf of the hockey club defaulted on a bond payment for the first time in 2008, according to a court document posted on EMMA, then filed for Chapter 11 bankruptcy in 2013. The hockey club itself filed for Chapter 11 in 2015.

Negotiations over the terms of a reorganization that included repayment of the bonds fell short and the trustee demanded that it take ownership of the facility. The court approved the transfer of title to a special-purpose entity created by the trustee in late 2015.

Since then, the facility has been managed by Fairview Facilities Management LLC with the aim of improving the market value of the facility to read it for sale.

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