Bond-financed Arizona sports venue files for bankruptcy

A massive Arizona participant sports venue that defaulted on its bonds headed to bankruptcy court Monday for a reorganization plan that aims to sell the property.

Legacy Cares, Inc., the nonprofit developer of Legacy Park, said in a disclosure notice that it pursued Chapter 11 bankruptcy in federal bankruptcy court in Arizona on the advice of legal counsel and that investment banking firm Miller Buckfire has begun preliminary marketing of the 320-acre venue.

An August completion of the sale process is anticipated, according to a statement from Legacy Cares, although the disclose notice posted on the Municipal Securities Rulemaking Board's EMMA website cautioned that "no assurance can be given if or when the borrower's interest in Legacy Park will sell or at what price."

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"Legacy Cares intends to use this process to protect and support the park's business operations and address Legacy Cares' debt obligations while working towards an orderly and efficient possible sale of Legacy Cares' assets in a manner that maximizes their value," Douglas Moss, the nonprofit's president, said in the statement.

The bankruptcy petition lists assets totaling $242.3 million and liabilities of about $367 million with the largest creditor being UMB Bank, the trustee for $284 million of mostly tax-exempt revenue bonds Legacy Cares sold in 2020 and 2021 through the Arizona Industrial Development Authority to build the park in Mesa that opened in January 2022. The unrated bonds were priced at yields from 6.25% to 7.836%.

Legacy Cares marks the fourth Chapter 11 bankruptcy filing involving defaulted municipal bonds so far this year, following about 10 in 2022, according to Municipal Market Analytics.

Last year, UMB Bank declared events of default because Legacy Cares failed to make scheduled monthly payments toward the revenue fund that supports debt service on the venue, which was built to host youth and amateur competitions in sports including soccer, basketball, volleyball and pickleball.

A bond payment default occurred in January when only $2.68 million was available in the bond fund to make a $10.3 million interest payment.

In February, bondholders rejected a plan to refinance the bonds and generate funds to settle claims from contractors and others.

In April, Bell Bank, which held naming rights to what had been known as Bell Bank Park, announced it had terminated the 2021 naming rights agreement and Legacy Cares disclosed it had retained Miller Buckfire to investigate options for the venue.

Monday's disclosure notice said UMB Bank conditionally agreed to permit Legacy Cares' use of cash collateral to allow the bankruptcy petition to proceed and cash advances for operating costs, along with other measures that are all subject to certain agreements. 

"As part of the Chapter 11 case proceedings, it is anticipated that the borrower will move to enter into a (debtor-in-possession financing) agreement with the trustee to cover approved operational expenses of the borrower, the Chapter 11 case professional fees, and other costs of the reorganization," the notice said.

It added the (debtor-in-possession) financing would be an additional financial obligation of Legacy Cares that may be funded from money held by the trustee in the debt service reserve fund established under the indenture.