– Bonfante Gardens founder Michael Bonfante has restructured a
portion of his fiscal interest in the horticultural theme park to
help free up short-term cash for the financially struggling
GILROY – Bonfante Gardens founder Michael Bonfante has restructured a portion of his fiscal interest in the horticultural theme park to help free up short-term cash for the financially struggling facility.
Monday, Gilroy’s City Council unanimously approved an action that will allow Bonfante and his wife Claudia to forego receipt of interest payments for the next decade on $8,700,000 in park bonds the couple owns.
The move is expected to reduce the park’s annual debt service by over $870,000 a year, according to a city staff report.
“He’s expanding his risk to try to help the cash flow of the project,” said city Administrative Services Director Michael Dorn.
The city assisted Bonfante Gardens in 2001 by facilitating the sale of roughly $37 million in project revenue bonds to help finance the $100 million-plus park. Roughly $27.9 million of the bonds were sold to the public, while another $9.8 million were sold to either Michael or Claudia Bonfante or their family or close associates.
To accomplish Monday’s move, Council approved the exchange of the Bonfantes’ $8.7 million in current interest bonds to newly issued convertible capital appreciation bonds, which will convert over to current interest bonds in 2012.
The total proposed debt, 10 percent interest rate and 2025 final maturity date will remain the same.
In both cases, the city has acted as the legal issuing agency for the tax-exempt bonds and has no financial obligation for them, according to city officials.
Bob Kraemer, president of the nonprofit park’s board of directors, said as far as he knows Bonfante made the decision on his own.
“To the best of my understanding, he made the decision on his own without anyone asking him,” Kraemer said.
While the deferred interest payments may theoretically mean facing higher payment amounts in the future, saving cash now is a good thing for the park, Kraemer said.
“At this stage of the game our interest is today,” he said. “If we can do everything we can to get healthy, deferring anything at this stage is good for the park.”
Councilman Roland Velasco was absent from Monday’s meeting.