CHICAGO — The trustee on $113 million of bonds that financed construction of privately owned Branson Airport drew on supplemental reserves to make a July 1 debt service payment as the operators work to bolster business and stave off future enforcement actions by bondholders.

The trustee, UMB Bank, tapped about $3.1 million from a supplemental reserve to make its $3.4 million July 1 debt service payment, leaving the reserve with $3.2 million remaining. “The trustee has not determined whether the full semiannual payment scheduled for January 2012 will be made,” a bondholder notice reads.

Branson Airport LLC, which operates the airport in Missouri’s Ozark Mountains, in April won some breathing room from bondholders under a forbearance agreement. While Branson is current on all debt service payments through the use of bond reserves, its inability to cover its payment last January with airport revenues triggered a default event.

UMB Bank also used reserves to fully cover debt service last year. The airport owes semiannual interest payments of $3.4 million until July 2013, when principal repayment begins. Airport officials and UMB began negotiations last year that led to the April signing of the forbearance agreement. In anticipation of the pact, the bank agreed to advance $500,000 from supplemental reserves to the airport for operations in the form of a secured note backed by a property pledge.

Under the forbearance and funding agreement, the airport owner can use a combination of up to $2 million from bond reserve funds and $3 million in additional equity or subordinated debt funds for working capital, buying more time for services and revenues to “become sufficient to meet all operating and debt service costs,” according to bondholder notices.

Under the forbearance agreement, the trustee agrees not to take any enforcement measures allowed by the bond indenture in the event of a default. In that event, bondholders may demand immediate repayment of all principal and interest, terminate the airport’s operating lease, and pursue legal action to capture revenue. In the event of an ongoing state of default, they also could eventually move to foreclose on the property, according to the offering statement.

The agreement staves off any action until June 30, 2012. If the airport meets various terms involving activity levels, revenues, and operating expenses, the expiration is extended by one year. The company remains in compliance with the agreement’s terms. 

Private developers put together a public and private financing package in 2007 to pay for construction of the facility, which opened in May 2009 to further grow tourism in Branson, the self-proclaimed live music capital of the country that draws more than seven million tourists annually. The unrated tax-exempt bonds were issued through the Branson Regional Airport Transportation Development District, which was established for that purpose.

The airport has continually added service, bolstering its prospects, but passenger counts still remain behind original estimates as the tourism and airline industries lag. Last month, Branson and Frontier Airlines announced new seasonal service at the airport to Phoenix and Austin beginning in September. Frontier, AirTran Airways — which has been acquired by Southwest Airlines — and Branson AirExpress serve the airport.

In other recent developments, Branson’s City Council last month approved a payment of $327,000 to the airport under its revised pay-for-performance agreement, according to published reports. The airport relies on a semiannual subsidy from the city based on the number of passengers under the agreement.

The city initially withheld a 2009 payment but later made one under the revised agreement. It also made its 2010 payments. Airport officials believe the agreement is enforceable while city officials contend they are not required to honor the ­agreement because the payments are subject to appropriation and funding for city services comes first. Under the revised pact, the subsidies go directly to cover debt service.

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