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 stationís 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.