Illinois Valley Public Telecommunications Corporation (IVPTC), the license holder of Public Television Station WTVP-Channel 47, entered into a $10.3 million bond issue on September 12, 2001. The purpose of the bond issue was to fund the federally mandated transition from analog to digital broadcasting as required by the Federal Communications Commission, and to construct a new digital broadcast and production center to house the required additional equipment and technology.

The bonds were twenty-two year bonds and were guaranteed by a letter of credit from the Bank of America and Commerce Bank. The letter of credit was to be re-paid from the proceeds of pledges made and paid.

The station’s fundraising campaign, so called the Funds for Forty Seven campaign, raised $7.5 million of the needed $10.3 million. The money raised from this campaign was invested so that the earnings would help cover the substantial interest costs and fees associated with the bond issues. Since the campaign fell short and interest rates following 9/11 fell to below 1%, IVPTC has had to dip into the principal to make monthly interest and annual principal and fee payments. Although using the principal was not ideal, all payments have been made, on time and in full.

Even though the amount of the letter of credit was $10.3 million and $7.5 million in pledges was collected, about $7 million is still owed. Just as with a home mortgage, a significant amount of dollars was required to pay closing costs and fees. Additionally, monthly interest costs, principal payments and various fees amounted to about $1.5 million annually.

Bank of America determined that the failure to raise the full amount of the pledges constituted a non-monetary default on letter of credit covenants, and notified IVPTC that it would not renew the letter of credit on September 1, 2007. Suddenly, what was slated to be paid back over 22 years was now due in only two years. A forbearance agreement negotiated earlier this year (2007) extended that date to January 15, 2008. At that time, the bondholders will be paid by the letter of credit, and IVPTC becomes a debtor to Bank of America.

WTVP has been attempting to work out an acceptable restructuring agreement with Bank of America and Commerce Bank for the past two years. To date, a mutually acceptable solution has not been found. WTVP is still attempting to develop a plan acceptable to the banks.

If Bank of America does not accept a restructuring offer, it has indicated that it will seize all assets and sell the station either in whole or parts.