BRADENTON, Fla. — The financially troubled Clay County Gas Utility District in Tennessee said Tuesday that it would redeem $200,000 of its $3.25 million of outstanding gas system revenue bonds on Dec. 1.
The district has not made a single debt service payment since selling unrated, uninsured bonds in 1998 with serial maturities between 1999 and 2007, and term bonds in 2012 and 2017.
Proceeds were used to buy equipment and install a natural gas distribution system.
The utility plans to redeem $200,000 of principal and accrued interest, according to a notice filed on the Municipal Securities Rulemaking Board’s online EMMA system by Bank of New York Mellon, the trustee.
The prospective payment represents a portion of $940,000 of term bonds that mature on Dec. 1, 2012.
In August, the district posted a notice stating that the Board of Commissioners had approved pursuing a tender offer to bondholders by Sept. 15. The notice said Morgan Keegan & Co. would be the tender agent.
The bonds were originally issued by Cumberland Securities, a division of Morgan Keegan. The firm declined to comment on the plan of finance going forward.
Ray Norris, president of the district’s board, could not be reached for comment.
A year ago, Norris said in an interview with The Bond Buyer that the utility was working on a plan to deal with the outstanding debt, which totaled $4.7 million in missed principal and interest payments at the time.
According to Tennessee state documents, the district was beset by several problems in the years after the bonds were sold, including the conviction of its project manager, who allegedly embezzled about $200,000.
In 2004, the utility tried to restructure the debt after negotiating to pay bondholders about 26 cents on the dollar.
However, local voters refused to approve the issuance of new bonds in a referendum.
The Gas Utility District, which is aligned with Clay County, was projected to have 600 customers upon its initial startup.
However, Norris said the well-publicized legal problems of the project manager who went to prison was “a killer” for the district to lure new customers.
The system had around 198 customers a year ago.
Some of the term bonds scheduled to be redeemed next month have in recent years traded for pennies on the dollar.