South Bay Community Development, Fla., to restructure $30.67 million series 2005 bonds

By Angela McDaniels

Tacoma, Wash., March 27 – Florida’s South Bay Community Development District will restructure three series of capital improvement revenue bonds, according to a memorandum.

The district previously defaulted and remains in default on the bonds, which include the following:

• $22,175,000 of outstanding series 2005A bonds, originally issued in the principal amount of $22,755,000;

• $9.38 million of outstanding series 2005B-1 bonds, originally issued in the principal amount of $16,175,000; and

• $18,515,000 of outstanding series 2005B-2 bonds.

The district said the result of the restructuring is that the participating bondholders will receive less than full payment of principal and interest due on the bonds.

As previously reported, South Bay failed to pay debt service on the bonds when due. Trustee U.S. Bank NA said the payment failures arise from landowners’ continued failure to make special assessment payments, which ultimately secure the bonds.

Cancellation, exchange

Under a restructuring agreement, bondholders have agreed to cancel $11.63 million of the original bonds and to waive delinquent interest on those bonds.

The canceled bonds include $1,275,000 principal amount, allocated pro rata among each series, canceled in exchange for the conveyance by the district to a special purpose entity, South Bay CDD Holdings, Inc., of some real property purchased by the district using a portion of the proceeds from the original bonds.

The bondholders also agreed to exchange $19.04 million of the original bonds for $34,495,000 of new capital improvement revenue refunding bonds.

The $19.04 million to be exchanged includes $8,575,000 of series 2005A bonds, $3.37 million of series 2005B-1 bonds and $7,095,000 of series 2005B-2 bonds.

In exchange for these bonds, holders will receive $9.97 million of series 2015A-1 5.95% bonds due 2036, $11.28 million of series 2015A-2 6.6% bonds due 2036, $9.07 million of series 2015B-1 5.125% bonds due 2020 and $4,175,000 of series 2015B-2 6.6% bonds due 2025.

The series 2015A-2 and 2015B-2 bonds will be convertible capital appreciation bonds. Their initial principal amounts will be $8,928,571.20 and $3,304,679.50, respectively.

Redemption

The holders of $245,000 of series 2005B-1 bonds and the holders of $165,000 of series 2005B-2 bonds have not been identified. These non-participating bondholders’ outstanding original bonds will not be exchanged and will be redeemed on the earliest redemption date at par plus accrued interest.

Following the exchange, the cancelation and the defeasance of the original bonds held by non-participating bondholders, $6,755,000 of series 2005A bonds – all held by the participating bondholders – will remain outstanding.

Following the restructuring, the un-exchanged bonds will continue to be secured by a portion of the original assessments levied on the same lands as the assessments on the series 2015A-2 bonds, subject however to the terms of the restructuring, which the district said makes significant changes to the security for, remedies upon default under and transferability of the un-exchanged bonds.

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