CHICAGO – A majority of investors holding $113 million of bonds issued for the privately owned and operated Branson Airport in Missouri have agreed to give the struggling Ozarks air field another year to bolster operations.
Branson Airport LLC previously defaulted on terms of a forbearance agreement and faced possible bondholder enforcement action without a new agreement. The
The revised agreement lays the groundwork for negotiations on amendments to the original bond documents. It “contemplates that negotiations with the company may result in company proposals to amend the bonds and bond documents,” a notice posted by trustee UMB Bank NA read.
It makes clear that any such restructuring “would be implemented through either an out of court consent by holders of 100% of principal amount of the bonds outstanding or a court supervised process supported by the participating holders that will provide notice to all holders of the bonds.”
The tax-exempt, unrated bonds were sold in 2007 by the Branson Regional Airport Transportation Development District on behalf of private developers. Proceeds funded the airport to serve the city’s growing tourism. It opened in 2009 but it has fallen short of meeting initial service and passenger projections.
The bonds are secured by real and personal property interests held by the company including a leasehold interest in the airport.
Under terms of the new agreement, the company agreed to amended passenger and budget projections through the end of the year and will provide monthly financial reports during the forbearance term. The document outlines events that could trigger its termination including the airport’s failure to hit certain operational benchmarks.
The benchmarks measure whether budgeted targets are hit and require the company to perform under air services agreements with scheduled carriers and scheduled charter carriers, according to the notice. A majority of holders that have driven decisions to date have agreed to various trade restrictions.
Under the agreement, the trustee would free up for operations up to $1.65 million in remaining bond funds if matched by the company. The trustee holds $3.2 million.
Bondholders have showed patience in giving the airport time to succeed as its prospects have brightened with new service added by Southwest Airlines, which took over existing service provided by AirTran Airways after acquiring the company.
The airport had faced the loss of federal support for its control tower due to sequestration but U.S. Transportation Secretary Ray LaHood announced earlier this month that the recently enacted “Reducing Flight Delays Act of 2013” will allow the Federal Aviation Administration to transfer sufficient funds. President Obama signed the legislation May 1.
The airport defaulted on bond terms in 2011 but won a reprieve from any bondholder enforcement actions in its first forbearance. Bondholders agreed to an extension and amended forbearance last year but a June 30 expiration was approaching.
The agreement can be terminated or extended based on compliance with the terms. The agreement imposed certain performance milestones and repayment terms on the airport operators and UMB reported earlier this year that the airport was not in compliance.
Though the airport’s prospects have brightened, its losses have continued. The airport posted a $6.9 million operating loss last year which it attributed to significant start-up marketing expenses. The trustee opted not to make a semi-annual interest payment of $3.4 million due Jan. 1. It did not make payments due in 2012 after dipping deeply into reserves to cover previous payments.
Under the bond indenture, bondholders can demand immediate repayment of all principal and interest, terminate the airport’s operating lease and pursue legal action to capture revenue in the event of a default. In the event of an ongoing state of default, they also could eventually move to foreclose on the property.
