Update: FSA Can Make Payments on Construction Bond
Fulton Science Academy's Angela Lassetter says Wells Fargo's demand is in attorneys' hands now. A payment agreement, new investor or selling the land for the proposed building are some possible solutions.
UPDATE June 28, 5:30 p.m.: Fulton Science Academy Board of Governors member Angela Lassetter said today the schools can pay back the $18.9 million in bonds.
Lassetter spoke about FSA's future as a private school, a school system audit report and her school's investigation and response to that report in an interview this afternoon.
Wells Fargo Bank, the bond investor, sent out a "Notice of Acceleration" on June 25 by certified mail to the Development Authority and the three schools involved: Fulton Science Academy (middle school), Fulton Sunshine Academy (elementary school) and Fulton Educational Services (Fulton Science Academy High School).
The bank's notice, sent by Virginia Anne Housum, a vice president for Wells Fargo, said the borrowers have breached the loan agreement, which puts the schools in default. The trustee demanded immediate payment of the $18.9 million bonds and interest by June 27.
Lassetter said the issue is in the hands of legal counsel now. She said several solutions are possible:
- An agreement could be made with the investors over the bonds that may not include the soon-to-be private school.
- FSA could sell the land on Fanfare Way intended for the new building planned for construction with the bond issue. Lassetter said the 44 acres is worth two to three times the purchase price and the market value will cover more than the approximatley $6 million already spent.
- The land is worth two to three times the purchase price and its market value will cover more than the approximate 6 million already spent. Grading the land has prepared it for construction, making it a more valuable property, she said.
- An investor could buy the property and still build a school on it, leasing it to FSA and the others schools for use.
- Or another investor might come along and buy the bonds, setting up a repayment agreement with FSA and its partner schools–Fulton Sunshine Academy and Fulton Science Academy High School. This last solution would be ideal, because the school could still be built, she said.
"Part of the bond agreement required that we get a charter," Lassetter said. Local and state charter denial put the school in default.
Although the Alpharetta Development Authority approved the bond sale, this demand has no affect on the city.
"With respect to the Development Authority, a move by the investors to call the bonds has absolutely no impact on that body, the City, or our citizens. By law the debt on the bonds is not an obligation of any of these parties and is solely the responsibility of the FSA schools," said James Drinkard, Alpharetta assistant city administrator.
He doesn't expect any changes in how the Development Authority proceeds with future bond applications. It's the responsibility of the involved underwriters and banks as well as the rating agency(s) that rate the issue to perform due diligence on the bond applicant. The Development Authority's due diligence is limited to is limited to ensuring that the intended use of the bonds is consistent with what's allowed under law and that it advances the economic development goals of the community, he said.
Fitch Ratings downgraded the school's bond rating from "CC" from "B" during mid-May and now bondbuyers are asking for the bond to be paid back. The school had planned to use the money to build a new facility in Alpharetta.
In the May BusinessWire release, Fitch said that lack of management cooperation left it unable to determine if the middle school's proposed conversion to a private school was feasible and its possible effects on the Fulton Sunshine Academy and Fulton Science Academy High School. All three schools are obligated for the bonds.
Check back with Patch for updates to this story soon.
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