Muni bonds for rich seniors
When I hear “municipal bonds” I usually think of the “public wealth” being used to assist the less fortunate or being used to build common assets that are available to all the public. But in Massachusetts it’s the veryÂ wealthiestÂ that haveÂ benefitedÂ from public financing.
Linden Ponds, an upscale retirement community where President George H.W. Bush’s brother, Prescott Bush Jr., spent the last part of his life, is in the process of defaulting and restructuring on $152 million in municipal bonds.
From the Boston Business Journal:
Last month, Linden Ponds skipped a principal and interest payment on its bonds as a way to conserve cash. Linden Ponds is a nonprofit whose creditors include municipal bond mutual funds based in Boston. Sovereign Bank also plays a major role as the letter of credit provider, or financial backstop, on the variable rate portion of the debt.
On April 14, the board of the Mass Development Finance Agency, which in 2007 issued the original bonds on behalf of Linden Ponds, authorized a restructuring term sheet that would allow a bond refunding. Investors holding about 75 percent of the debt have agreed to refinance up to $152.2 million in outstanding bonds. MassDevelopment declined to give any more specific details.
Now Iâ€™m assuming that it is the bondholders who will be taking a loss on their investment in this high end, public/private retirement community. Because if it is the taxpayers that would be a hard one toÂ stomach.
I spent hours reading Linden Ponds documents today and unfortunately canâ€™t easily summarize all the cash flows between the local, public entity and private firm in Maryland that built the facility and earns substantial â€śmanagement fees” for overseeing Linden Ponds. The private entity, Erickson Retirement Communities, went bankrupt last year, but this facility was not part of that proceeding.
Then I tipped my toe into the background of Mass Development, which is overseeing the refunding and reissuing of Linden Ponds bonds. From the MassDev website:
Created in 1998 when the Massachusetts State Legislature enacted M.G.L. Chapter 23G and merged the Massachusetts Government Land Bank with the Massachusetts Industrial Finance Agency, MassDevelopment is the stateâ€™s finance and development authority.
Both a lender and developer, the Agency works with private- and public-sector clients to stimulate economic growth by eliminating blight, preparing key sites for development, creating jobs, and increasing the stateâ€™s housing supply.
Who is benefiting from municipal bonds? It is really hard to determine.
MSRBâ€™s EMMA: Linden Ponds Monthly Reporting Package for February 28, 2011
MSRBâ€™s EMMA:Â Linden Ponds debt schedule
Guidestar: Linden Ponds 990 for 2009