DALLAS - The Colorado Ocean Journey Aquarium will close April 2, and its facilities will be turned over to the owners of $57 million of revenue bonds issued to finance the Denver attraction.
Aquarium officials made the decision to close after failing to come to terms with holders of the unrated revenue bonds sold for the facility in 1997 by the Colorado Post Secondary Educational Facilities Authority, now known as the Colorado Educational and Cultural Authority.
"We will close on April 2 and basically turn the title of the land and facilities over to bondholders to allow them to resolve the matter as they see fit," said Ocean Journey president Doug Townsend. "We reached an impasse in negotiations, and ... we aren't in a position to make any kind of offers to the bondholders, because we don't have the cash on hand to last long enough for them to review the financials."
The aquarium opened in 1999 but has failed to meet attendance forecasts. A potential takeover by the city of Denver was scrapped earlier this month when Mayor Wellington Webb said the state's economy is too shaky to take on an uncertain enterprise such as the aquarium.
The aquarium recorded an operating deficit of $6.8 million in 2001 and fell into technical default on the debt last July for not depositing money into the reserve account as mandated by the bond covenant. The aquarium has $56.8 million of bonds still outstanding and has been making payments to bondholders from a reserve fund that currently holds $9.5 million. To date, the aquarium has not missed a bond payment or a payment on a $6 million federal Housing and Urban Development loan guaranteed by Denver.
The site on which Ocean Journey sits includes 16.8 acres of undeveloped land, as well as the aquarium. Bondholders have said they believe the land, which is located near Mile High Stadium, is worth as much as $30 million, according to Townsend. Ocean Journey officials had listed the land's worth at $61 million and the aquarium's worth as $3.7 million.
Bondholders froze Ocean Journey's reserve accounts immediately after city officials announced they would not take over the aquarium. City takeovers of aquariums in Long Beach, Calif., and Tampa, Fla., have been successful.
Townsend said he understands that bondholders expect a return on their initial investment.
"I don't fault the bondholders for not working with the aquarium to keep it open ," Townsend said. "Unfortunately, when the city walked away from the deal, everyone was left scrambling for some kind of solution."
About two-thirds of the bonds are held by Putnam Investments, with about $17 million in the Putnam Tax-Free High-Yield Fund and about $10 million in the Putnam Municipal Income Fund. Another $10 million are owned by other Putnam funds. The debt, which was considered high-risk, carried interest rates of 8.375%.
Officials from Delaware Investments, the second largest investor in Ocean Journey bonds, said they had viewed the alliance with the city as the last hope in keeping the aquarium open.
Dain Bosworth, now known as RBC Dain Rauscher Inc., was the underwriter for the deal. Holme Roberts & Owen served as bond counsel for the issuer.
Some bankers said hopes by Ocean Journey's management that bondholders might forgive the debt were misguided.
"This cavalier attitude that bondholders take the hit had to have been a deal-breaker, and it shows the ineptness of this management team," said Russ Caldwell, a senior vice president with Kirkpatrick Pettis. "Bondholders shouldn't take the loss -- they have to do what's right for their investors."
He said he hoped this wouldn't be the end for the aquarium.
Aquarium officials say they are working now to find buyers for the fish and other wildlife that currently live at Ocean Journey.
