Agenda - Council - 08/13/2013 - Laserfiche WebLink

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(6) proposals to eliminate the tax-exempt status of bonds issued to finance educational facilities, or to limit the use of such tax-exempt bonds, have been made in the past, and may be made again in the future. The adoption of such proposals would increase the interest cost to the Company of financing future capital needs. Value of Mortgaged Property Security for the Bonds includes a mortgage lien on the Project evidenced by the Mortgage in favor of the Trustee. Attempts to foreclose under the Mortgage may be met with protracted litigation and/or bankruptcy proceedings, which proceedings cause delays. See "ENFORCEABILITY OF OBLIGATIONS." Thus, there can be no assurance that upon the occurrence of an Event of Default, the Trustee will be able to obtain possession of the Project and generate revenue therefrom in a timely fashion. Because of the special nature, location, regulatory restrictions and other factors relating to the Project, there can be no assurance that proceeds derived from the sale of the Project upon default and foreclosure of the Mortgage would be sufficient to pay all amounts due in respect of the Series 2013 Bonds. Furthermore, the Mortgage contains several Permitted Encumbrances as described in the Mortgage. See Appendix E: "THE MORTGAGE." Damage or Destruction Although the Company will be required to obtain certain insurance, as set forth in the Loan Agreement, there can be no assurance that the Project will not suffer losses for which insurance cannot be or has not been obtained or that the amount of any such loss, or the period during which the Project cannot generate revenues, will not exceed the coverage of such insurance policies. In addition, such insurance may be obtained through the use of the State - sponsored Minnesota School Boards Association Trust rather than a private insurance company. The Minnesota School Boards Association Trust is not reviewed or rated in the same way as a private insurance company or subject to the same regulatory oversight. Effect of Federal Bankruptcy Laws on Security for the Series 2013 Bonds Bankruptcy proceedings and equity principles may delay or otherwise adversely affect the enforcement of Bondholders' rights in the property granted as security for the Series 2013 Bonds. Furthermore, if the security for the Series 2013 Bonds is inadequate for payment in full of the Series 2013 Bonds, bankruptcy proceedings and equity principles may also limit any attempt by the Trustee to seek payment from other property of the Company, if any. See "ENFORCEABILITY OF OBLIGATIONS." Also, federal bankruptcy law permits adoption of a reorganization plan, even though it has not been accepted by the holders of a majority in the aggregate principal amount of the Series 2013 Bonds if the Bondholders are provided with the benefit of their original lien or the "indubitable equivalent." In addition, if the bankruptcy court concludes that the Bondholders have "adequate protection," it may (i) substitute other security subject to the lien of the Bondholders, and (ii) subordinate the lien of the Bondholders (a) to claims by persons supplying goods and services to the Company after bankruptcy and (b) to the administrative expenses of the bankruptcy proceeding. The bankruptcy court may also have the power to invalidate certain provisions of the Mortgage that make bankruptcy and related proceedings by the Company an event of default thereunder. 34