CHICAGO -- The St. Paul Port Authority last year posted an overall loss of $4.6 million, primarily due to losses in its Resolution 876 Common Revenue Bond Fund, according to audited financial statements released on Friday.
The financially troubled 876 program lost $5.5 million in 1993, compared to the authority's other real estate projects, which netted $921,769, according to a press release.
The authority has projected a default on $256 million of $305 million of bonds in its 876 program in 2000 if a debt restructuring plan is not implemented.
After two restructuring plans put forth by the authority failed to receive a majority of bondholder support, Houlihan Lokey Howard & Zukin, a Los Angeles-based investment banking firm, stepped in earlier this year with another plan, which many bondholders support. The firm is now confirming support for the plan, which could be implemented as early as September.
The Resolution 876 bonds were issued for commercial real estate developments in St. Paul and are backed by lease payments. The program sustained losses because of defaults on the lease payments due to a sluggish real estate market in the late 1980s.
Michael Strand, vice president of communications for the authority, said that 1993 marks the first year financial statements for the 876 program and the Port Authority's other real estate projects were detailed in both separate and consolidated forms.
The authority separated the financial statements to show that the agency "is not on the verge of bankruptcy" despite losses over the past six years in the 876 program, Strand said.
"While the 876 program is stalled, it is not impacting the Operations of the Port Authority," Strand said.
In a press release, Kenneth R. Johnson, the authority's president, said that 876 program losses in the last three years have been "significantly reduced" because of the closing out or restructuring of the program's problem loans and general improvement in the local real estate market.
Strand said the authority experienced an overall net loss of$17.8 million in 1991 and $12.2 million in 1992. Most of the losses stemmed from deficits in the 876 program, he said.
As a result. of the recent improvements in the 876 program, the amount of reserve money needed to cover program losses was reduced to $69 million in 1993 from $75 million in 1992, Strand said.
Despite the improvements, the authority believes that a full restructuring of 876 bonds is still needed to avert a default, Strand said.
Authority officials have endorsed the final draft of the plan submitted by Houlihan Lokey, but will not formally consider it until they see "a definitive consensus" from bondholders.
George L. Schneider, a vice president at Houlihan Lokey, said yesterday that the firm is "dosing in" on the necessary support.
"Things are progressing as planned," Schneider said. The firm could receive the needed support by the end of the week, he said.
The key transaction of the Houlihan Lokey plan involves an exchange of $217.98 million of long-term 876 bonds that mature after June 1, 2005,
for $207 million of new fixed-rate bonds with a reduced interest rate and $10.9 million of capital appreciation bonds.
In order for the Houlihan Lokey plan to work, 90% of the authority's long-term bondholders should participate in the plan, Schneider said. The debt woUld equal about $218 million of bonds that mature after 2005.
In 1992, the authority reported a net income ors 173,000, the first year since 1988 that it has shown a profit. However, the positive showing was due primarily to a one-time windfall from the retirement of bonds that financed the construction of the authority's headquarters in St. Paul.
"When adjusted for the extraordinary item, the 1992 and 1993 consolidated statement losses were virtually unchanged," the authority said.