Owners of some defaulted revenue bonds issued in 2018 for a senior living community in Plano, Texas, reached a binding settlement with the project’s bankrupt owner that calls for the re-issuance of debt.
The agreement involves nearly $57.3 million of Series A and B senior bonds sold through the New Hope Cultural Education Facilities Finance Corporation to finance the Bridgemoor at Plano project for BSPV-Plano, LLC, which filed for Chapter 11 bankruptcy in March 2022 after the 318-unit rental project was beset with problems, according to a disclosure notice posted Friday on the Municipal Securities Rulemaking Board’s EMMA website by bond trustee, The Huntington National Bank.
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Debt would be reissued with a seven-year maturity from the date BSPV-Plano’s bankruptcy exit plan takes effect and would have the same priority and security the existing bonds had prior to the bankruptcy filing.
For Series A tax-exempt senior debt, $50.53 million of principal bonds would be issued with an interest rate “sufficient to generate the same payment amount that would be generated if the entire Series A bond claim accrued interest at 6.25%,” the disclosure notice said, adding that rate would be 7.2535% if the plan is effective Oct. 1. Non-interest-bearing bonds would cover $8.11 million in accrued unpaid interest.
For Series B taxable senior debt, seven-year bonds for $6.675 million in unpaid principal and $1.18 million in accrued unpaid interest would be issued with a 6.25% interest rate.
The settlement also calls for BSPV-Plan to deposit $2.2 million in the debt service reserve fund held by the trustee on the effective date of the plan and consent to the bankruptcy court issuing an injunction barring any future bankruptcy filing as long as the Series A and B bonds remain outstanding, the notice said.
BSPV-Plano had originally proposed paying all bondholders over seven years at various annual interest rates and with interest-only payments for 23 months and a balloon payment due at maturity, prompting the bond trustee to oppose the plan’s confirmation. For Series A and B bonds the proposed interest rate was 5.15% per year.
Owners of $5 million of Series C subordinate revenue bonds and $4.5 million of Series D junior subordinate revenue bonds voted to accept the terms of the original plan with interest rates of 5% and 4% respectively, according to the bond trustee.
The troubled senior living sector accounted for the largest par amount of new impairments in the first six months of 2023, according to Municipal Market Analytics.
The unrated bonds for the Bridgemoor at Plano have been in default since Nov. 15, 2020, due to a failure to make interest and principal payments, the trustee said in previous notices. A default also occurred when $2 million was not deposited into an operations and maintenance reserve fund.
The project, which was started in January 2019 with completion scheduled for June 2020, was hit with cost overruns due to the COVID-19 pandemic’s impact on supply chains and workforces, and surging inflation, as well as by weather-related delays.
Parts of the project were nearing completion and 64 units were occupied, according to a June construction update posted on EMMA.
The bond trustee said settlement will be included in a revised bankruptcy exit plan. The next hearing in Eastern District of Texas Bankruptcy Court is scheduled for July 31.