CHICAGO - The St. Paul Port Authority this week sent out ballots for Resolution 876 Common Revenue bondholders to vote on three amendments that would help avert in expected default of the bond program in 2000.
The amendments are supposed to improve the cash flows of the Resolution 876 program but they would not make a default impossible and they would not restructure the program's entire $322 million of outstanding debt, according to the authority.
The plan was unveiled in November after a group of institutional bondholders objected to the complete debt restructuring that the authority proposed in October 1992.
The Resolution 876 bonds, which financed commercial developments in St. Paul, were backed by loan payments to the authority. A slump in the city's business real estate market caused defaults on the loan payments.
The cash-flow plan would allow the authority to conduct a dutch auction that would make all individual bondholders eligible to voluntarily sell their bonds to the authority at a price set by the bondholder and accepted by the authority.
The auction would be funded by "excess" reserve money derived from prepayments made by borrowers of Resolution 876 bond-financed loans or from the net proceeds of the sale of Resolution 876 bond-financed properties. There is currently $25 million in the "excess" reserve fund.
The plan would also create a property management fund financed with existing program revenues to pay for capital and tenant improvements on repossessed properties to enhance their marketability. The fund would be initially funded by $500,000 from the Resolution 876 supplemental reserve fund and replenished by a semiannual allocation of 4% of net Resolution 876 revenues, which do not include the "excess" reserve money. The amount of money allocated to property management fund would be capped at $1 million.
Finally, the plan would make it easier for the authority to forgo repossessing property and instead negotiate workouts and restructurings of nonperforming loans.
In a letter to bondholders, the authority requested that the ballots be returned by Dec. 31. Kenneth Johnson, the authority's president, said in a press release that authority officials believe there is "broad support" for the Resolution 876 cash-flow plan. The plan would not affect any of the authority's other bond programs, Johnson said.
The authority's previous plan for Resolution 876 would have affected $258 million of bonds that mature after Dec. 31, 1999. About $63.9 million of bonds that mature before then would not have been affected. The plan asked affected bondholders to choose one of three options: a $45 million reduction in principal, a 25% reduction in principal, or a principal reduction of 15.5% and an interest rate reduction of 20%.