Following an April 12 forbearance and funding agreement between Branson Airport LLC and bond trustee UMB Bank, Branson city officials have responded with concern about the airport’s financials. The tense situation could cause the city to appropriate fewer dollars to the airport district.
Under a 2006 agreement, the city pays the airport’s regional transportation development district $8.24 per tourist flying into Branson – a deal that has moved $400,000 to the district from city coffers.
The city’s current bill from the airport is $327,770 for passengers coming to the city July–December. However, Branson Public Information Director Jerry Adams said the city only had $35,000 budgeted for payment.
“The bill was submitted to the board of aldermen, and they will make the decision as to what to pay the airport,” Adams said, noting the city has until June 9 to make payment. “We need to be able to document that the visitors coming to Branson are actually out-of-town visitors. That’s why there’s such a lapse in payment.”
Branson Board Alderman Mike Booth said its agreement with the airport is based on what the city is able to appropriate, and the aldermen have yet to determine whether increases in sales tax dollars would justify paying the full bill. He said the city has paid its bills in full to this point, but Branson’s leaders want more financial information on the company before it writes another check.
“The city should be granted the right to review all the financials to see if the airport is even going to be there to receive the check, if you will,” Booth said. “The action of the airport in the past has been to make very public the bill that it presents to the city, which has been paid in every single case, but when people ask about its financial position, it seems it doesn’t have to reveal its finances to the citizens, who are, in fact, paying them money.”
The contract, which was originally signed in 2006, states that payments from the city are subject to change based on its annual appropriations. Booth said the city might still determine that tax revenue due to tourism increased to the point that the full bill deserves to be paid. “If we run into a situation where we would have to cut our Fire Department staff or our policemen on duty in order to satisfy the bill, then there is probably a good chance that the appropriations would not be made,” he said.
Booth said he hopes city leaders can find a way to pay the tourism bill in full and that its appropriations help airport operators make ends meet.
“It is the hope of all of the Branson area, including the city of Branson, … that this airport is a success,” Booth said.
Forbearance status According to a Jan. 3 notice filed with the Municipal Securities Rulemaking Board, Branson Airport LLC’s failure to make its January debt service payment with airport revenues triggered a default and the resulting forbearance agreement. It is, however, current on all debt service through the use of bond reserves – including two payments last year totaling $3.78 million. Its next bond interest payment is due July 1.
Representatives of UMB Bank, which serves as trustee overseeing $114 million in revenue bonds used to construct the airport, are not speaking to the matter because they do not represent the bondholders but simply act as a mediator and enforcer of the bond indenture.
Through the forbearance, the trustee agrees to withhold enforcement measures allowed by the bond indenture as a result of the default event. Should airport owners fail to meet all the terms of the agreement, bondholders are within their rights to demand immediate repayment of all principle and interest, terminating its operating lease and foreclosing on the property.
According to Michael Hynes, an aviation consultant and operator of Hynes Aviation Industries in Branson, the bondholders could take possession of the airport should one of 19 termination clauses in the agreement be enforced.
“The existing airport and all its dealings would disappear, and the bondholders would start with a clean sheet of paper,” Hynes explained, adding that bondholders wouldn’t have to honor the more than $2.2 million listed in accounts payable at the time of the agreement. “Basically, they would force the airport into bankruptcy.”
The forbearance agreement requires airport operators place $3 million in its operating fund by June 11. It also stipulates the airport meet at least 70 percent of its enplanement and revenue projections through June 30, 2012. The agreement could be extended through June 30, 2013, should the airport meet its benchmarks.
The agreement allows the airport operators to use a combination of up to $2 million from bond reserve funds and $3 million in additional equity or subordinated debt for working capital. Roughly $8.3 million remains in its reserves to cover future payments, according to an unaudited first-quarter financial statement on file with the Municipal Securities Rulemaking Board. The airport is scheduled to begin paying on bond principal beginning in July 2013.
Branson Airport Manager Jeff Bourk was unavailable for comment by press time, and CEO Stephen Peet did not return a call for comment about the passenger agreement with the city.[[In-content Ad]]
A franchise store of a Branson West-based quilting business made its Queen City debut; Grateful Vase launched in Lebanon; and Branson entertainment venue The Social Birdy had its grand opening.
