ATLANTA -- A $7.2 million taxexempt bond issue sold by the Highlands County (Fla.) Industrial Development Authority in 1991 has defaulted, according to the deal's trustee.
A spokeswoman for the trustee, First Union National Bank of Florida, confirmed Friday that the Church of All Faiths Inc. Project bond issue failed to make its latest interest payment of $332,109 on April 1.
Declining further comment, she said nothing has occurred to change the defaulted status of the debt, for which the next interest payment and a $60,000 sinking fund payment are due in October.
All but $100,000 of the issue is outstanding.
A spokeswoman for the issuer declined comment, referring questions to Thompson White & Associates, a management company recently hired to review the project. An official at Thompson White, which is located in Huntsville, Ala., also declined comment.
The unrated bonds, dated Nov. 13, 1991, were underwritten by Summit Capital Markets Inc. of Winter Park, Fla., according to the deal's offering statement. The borrowing is structured with a single-term maturity due in October 2021, carrying a 9 3/8% coupon originally priced at 96.355. Mandatory sinking fund payments began in 1992 and continue annually through 2021.
The prospectus said proceeds were used to fund "acquisition of facilities for the mentally retarded and emotionally and developmentally disabled" located in five central Florida counties: Highlands, Hardee, Polk, Orange, and St. Lucie.
The offering statement noted that Church of All Faiths Inc., the project developer, acquired 12 homes for $6,338,000 and an additional two facilities for $400,000.
Proceeds were also used to fund the debt service reserve fund of $692,310.68, as well as an operations and maintenance reserve fund of $300,000.
The bonds are secured by "revenues of the issuer derived from payments by the company pursuant to the loan agreement" and are not obligations of the issuer, Highlands County, or the state of Florida, according to the prospectus.
"Substantially all of the revenues of the facilities," the prospectus said, "are expected to be derived from the state of Florida ... pursuant to the state's standard rate agreement for long-term residential care facilities and pursuant to contracts between the company and the state department of health and rehabilitative services."
The bonds are further secured by a first mortgage and security interest granted by the company on each of the project's facilities.
According to a letter from the trustee to bondholders dated Feb. 11 and obtained by The Bond Buyer, "the borrower has made none of the required monthly payments" since Oct. 1, 1993.
"In connection with the April 1994 interest and principal payment date, it is doubtful that there will be sufficient money available in the interest fund and the bond sinking fund to make the full interest payment and the full sinking fund principal payment," the letter said.
In its letter, the trustee noted that the "Flagship All American Fund and the Flagship Florida Tax Exempt Fund" were "collectively the beneficial owner of more than majority of the principal amount of bonds outstanding."
A spokesman for the Flagship group of mutual funds, which is based in Dayton, Ohio, said that it does not currently hold a majority of remaining bonds from the issue. He said that the default "has had no material effect on the [Florida] fund," which has assets of about $360 million.
The Flagship official said that shareholders of the Florida fund would be notified of any relevant information in a statement on the fund following the May 31 close of mutual fund group's most recently ended fiscal year.
Since the bond issue was sold, according to correspondence to bondholders from the trustee, Community Environments Inc. has succeeded Church of All Faiths as borrower.