SAN FRANCISCO — Wenatchee, Wash., and the special district that built a troubled sports arena in the city have approved agreements that they said will pave the way for a bond issue to clear up a $42 million note default.
The Greater Wenatchee Regional Events Center Public Facilities District plans to sell the bonds by the end of September or at least by the end of the year, according to last week’s filing on the Municipal Securities Rulemaking Board’s EMMA website.
According to the filing, the city and the district have also approved, but haven’t yet executed, agreements releasing all claims against Piper Jaffray & Co., the underwriter on the defaulted notes, and its bond counsel “if, and only if, bonds to retire the notes are issued.”
The two bodies have approved the deals that would include K&L Gates LLP adding $150,000 towards the refinancing, Piper Jaffray reducing its fee for underwriting the new deal to $100,000 from $470,000 and Foster Pepper PLLC forgiving money owed by the district and working at a reduced rate on the new financing, according to the Wenatchee World newspaper.
In June, the district’s board hired Piper Jaffray as underwriter and Foster Pepper, which employs an attorney who worked on the previous deal, as legal counsel.
K&L Gates was note counsel on the 2008 deal.
Neither city nor district officials were available to comment by press time.
The new agreements move the public facilities district closer to the sale of bonds by allocating sales taxes and securing a flow of funds that will help retire the notes.
The district, which was formed in 2006 to build and operate the 4,300-seat Town Toyota Center arena in Wenatchee, defaulted on $41.7 million of bond anticipation notes upon their Dec. 1 maturity because it lacked the means to pay them off — it was unable to organize a long-term financing.
The Securities and Exchange Commission is investigating everyone involved in the issuance that led to the default. The regulator has asked the city to voluntarily produce several different types of information, including anything tied to the event center’s finances and bond anticipation note issuance.
In 2008, the district issued three note series — $5 million of limited sales tax Bans, $31 million of revenue and special tax Bans and $5.5 million of taxable revenue and special-tax Bans.
The public facilities district paid the full Dec. 1 interest payment of $1 million due on the notes and has since paid available sales tax revenues toward interest and principal payment on the limited sales tax Bans.
It has made no principal or interest payments toward the revenue and special tax Bans.
The default followed failed rescue attempts by the city, which has a contingency agreement with the district to back the debt, and Washington.
Earlier in the year, Gov. Christine Gregoire signed a bill giving the city the authority to raise its sales tax without voter approval.
In April, voters in the counties that make up the district approved a separate 0.1% sales tax increase that will secure long-term bonds to refinance the defaulted Bans.
Moody’s Investors Service downgraded Wenatchee’s unlimited tax general obligation bond rating to Ba2 from A3 in May.
Standard & Poor’s downgraded the city’s long-term and underlying rating to BBB from A-minus. It also cut the short-term rating on the district’s notes to D from SP-3.