Agenda - 10-04-1993 - VIII-A - Laserfiche WebLink

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BENT BY:Xerox Telecopier 7021 ; 9-29-93 ; 5: 13PM ; 4043542801- ;g .2 PHN Capital Funding Inc. - In vestment Banking VIA FACSIMILE September 29, 1993 Mr, Ted W. Abernathy, Jr. Director Economic Development Commission Orange County 109 Court Street, Annear Hillsborough, North Carolina 27278 RE: Triangle Community Activity Center Dear Ted: I am writing on behalf of Municipal Financial Group, Inc. (MFG) and PHN Capital Funding Inc. (PHN) in response to two questions raised by the Orange County Commission relating to the proposed financing of the Triangle Community Activity Center (TCAC). (1) If, for example, in the sixth year of operation of the TCAC, revenues were not sufficient to make debt service payments on the proposed bonds, what steps would the investors (bondholders) take? The indenture of trust (Indenture) securing the bands for the benefit of the bondholders will provide for a rate covenant/user charge schedule intended to produce not less than 1.20 times annual debt service (after the payment of budgeted annual operating costs and expenses). Our current projections indicate that revenues available for debt service coverage should range from 1.5 times upward, increasing gradually over the life of the proposed bonds. The indenture will be closed ended—that is, prior to payment in Ill of the bonds, all TCAC revenues will be paid to the trustee and held in trust for the benefit of the bondholders. In other words, after the ayment of operations and debt service, no excess revenues may be released from the lien of the indenture, , cess funds, together with the investment income thereon, would be available to be applied toward payment of debt service and operations if the TCAC should encounter financial difficulties. Payments will be made on a monthly basis to the trustee under the indenture, and semiannual payments of interest and principal will be made to the bondholders. The timing of the payments to the trustee, together with the rate covenant, closed ended indenture structure intended to capture excess revenue, and nancial reporting requirements, will permit Orange County, MFG, PEN, the trustee and the bondholders to detect a potential short all in revenue well in advance • of a scheduled debt service payment, and will allow the avoidance of a payment default. One Buckhead Plaza•Suite 1880.3060 Peachtree Road,NW•Atlanta,Georgia 30305.4041364.2800•Fax:4041364.2801