GILROY
– Bonfante Gardens has reached an
”
agreement in principle
”
with its many creditors. The deal, dependent on the sale of 33
acres adjacent to the theme park, would reduce a $70 million pile
of debt to $14 million.
GILROY – Bonfante Gardens has reached an “agreement in principle” with its many creditors. The deal, dependent on the sale of 33 acres adjacent to the theme park, would reduce a $70 million pile of debt to $14 million.
Based on real estate industry estimates, the mega land deal between the Hecker Pass theme park and the neighboring Eagle Ridge luxury housing development is valued between $20 million and $40 million.
The deal depends on the Gilroy City Council’s approval to transfer housing permits from one land tract near Bonfante Gardens to the 33-acre parcel.
The board of directors would use the cash to bankroll a long-sought debt restructuring plan, clearing Bonfante Gardens of $56 million in bond debt and private loans. Park officials declined to provide details of the arrangement but confirmed that creditors agreed to a less-than-full-value payback plan.
“It certainly pays our creditors more than pennies,” Bonfante Gardens board president Bob Kraemer said. “Each creditor is in a different legal position, and each creditor is getting paid back to varying degrees.”
At a bondholders’ meeting last fall, Bonfante Gardens officials said they were trying to buy out some of the park’s bondholders with 80- and 90-cents-on-the-dollar offers.
Kraemer called the arrangement, which still must be signed by lawyers for the park and bondholders, the completion of phase two of Bonfante Gardens’ turnaround.
“We said from day one the first thing we needed to do is find someone to manage the daily operations of the park successfully, and we did that,” Kraemer said, referring to the opoerating agreement with Paramount Parks. “The second thing we needed to do was restructure our debt. That’s what we’ve been working toward and now, in principle, we’re there.”
Kraemer would not predict when the final debt restructuring agreement would be signed. He said lawyers for the park and creditors were in the process of “crossing T’s and dotting I’s.”
Kraemer said the completion of the debt restructuring gives Bonfante Gardens a debt amount – $14 million – that can be whittled down over future seasons. Last season, under the management of Paramount Parks, was the first time Bonfante Gardens turned a profit since its 2001 inception.
Kraemer also said the debt restructuring and the newfound profitability of Bonfante Gardens open the door to various park improvements in the near term as well as future expansion. He was skimpy on details.
“Are you going to see a 400-car rollercoaster? I hope never,” Kraemer quipped. “But there will be improvements to the park based on the amount of capital we have available. You won’t see a waterslide next year.”
The waterslide, not the 400-car rollercoaster, is a component of the park’s build-out plan.
The rest of the money
The remaining $14 million of debt is owed to so-called senior bondholders, creditors with liens on the park who typically get paid back first.
Senior bondholder Bud Byrnes, who represents $2 million worth of Bonfante Gardens debt, initially complained about the park’s payback plan.
Byrnes had argued that in most cases, the park would be foreclosed on, so senior bondholders could get their money back. After that, junior bondholders and private creditors would get paid back if money was still available.
In Bonfante Gardens’ case, junior bondholders and private creditors are getting paid back first. Meanwhile, senior bondholders did not foreclose on Bonfante Gardens so it could continue to operate with significantly less debt.
The park and Putnam Securities have both claimed this was the best way for senior bondholders to get their loans paid back in full.
“Ultimately this is a good thing for bondholders,” Byrnes conceded Thursday.
However, Byrnes says he still has gripes. Byrnes said he still does not know what kind of deal the park is offering him because Bonfante Gardens officials have yet to contact senior bondholders other than Putnam Securities.
“We’re literally at the mercy of what Putnam and the park work out,” Byrnes said.
Byrnes is under the impression he will be offered 80 cents to 90 cents on the dollar.
“It’s not what I signed on for originally, but it’s a heck of a lot better than what I got here now,” Byrnes said.
Byrnes said bonds currently are valued at 60 cents on the dollar.
Other creditors include Wells Fargo, Raley’s supermarkets and Michael Bonfante, the park’s namesake founder.
Bonfante is on vacation and could not be reached for comment. Kraemer would not say if the former Gilroyan and Nob Hill supermarkets owner would be taking a heftier cut than the other creditors.
99 homes or more
Now that a debt restructuring plan is in place, the park has formally approached the city to invoke a housing permit exemption for nonprofit companies like Bonfante Gardens.
Under the city’s growth-control ordinance, nonprofit companies can request up to 99 housing permits. The park wants the permits so it can sell the 33-acre parcel to Shapell Industries, the developer of Eagle Ridge.
Shapell representatives confirmed Wednesday they want to build up to 121 luxury homes, using the park’s 99 permits in addition to its own leftover housing permits.
City Council must authorize the housing permit exemption. It meets Monday at 6 p.m. in City Hall to discuss the issue. A decision on the matter, however, will not happen until a regular City Council session at a later date.
It will mark the second time this year Bonfante Gardens has approached City Council with a request to help the park continue operations.
The first time was back in January when Council had to amend the bondholders agreement. The agreement called for the park’s foreclosure when Bonfante Gardens failed to pay its monthly debt payment in December. That’s when Putnam Securities and the park asked Council to change that clause, so that only a majority of bondholders – which Putnam Securities comprises – could trigger a foreclosure.
Several City Council members since then have said they are ready to see the park’s dependence on the city end sooner than later. However, none have said they would oppose the housing permit exemption and two men on the Council – Mayor Al Pinheiro and Councilman Russ Valiquette – have close ties to the park.
Pinheiro sits on the board of directors in a volunteer position. Valiquette, who said he would step down from voting on any Bonfante Gardens issue, is a park employee.
Councilmen have said they would oppose using the housing permits to aid Michael Bonfante in any way.
Questions still linger regarding Bonfante’s plans for a 34-acre nursery parcel he owns adjacent to the park off Hecker Pass. It is a stretch, but depending on how one interprets a December 2001 agreement between the city, Michael Bonfante and Bonfante Gardens, the former Gilroyan may have claims to 85 housing permits there.
Bonfante tried to quell any concerns that he would still try to capitalize on those housing permits with a letter to City Administrator Jay Baksa.
“I understand that the Bonfante Nursery 34-acre parcel has no rights to the (housing permits) created by City Ordinance 2002-06 and will make no such claim in the future,” Bonfante wrote in the letter.
Ironically, Bonfante does not mention in the letter the 85 housing permits originally conceived of within the December 2001 agreement. However, Kraemer, Baksa and Pinheiro steadfastly claimed Wednesday the 85 housing permits were conceptual only.
“I don’t see how anyone can read Michael’s letter and think he intends to ask for housing permits,” Baksa said. “The 85 housing permits do not exist. If he wants to build homes there he has to go through the city’s regular processes.”
