Gilroy
– Bonfante Gardens paid more than $1 million in bond interest
this month, its first scheduled payment under a debt-restructuring
program designed to keep creditors at bay and stave off foreclosure
on the park.
Gilroy – Bonfante Gardens paid more than $1 million in bond interest this month, its first scheduled payment under a debt-restructuring program designed to keep creditors at bay and stave off foreclosure on the park.
Bob Kraemer, president of the park’s board of directors, said “the bond restructuring is on schedule.”
The horticulturally-themed park currently owes about $70 million to creditors, but has posted nearly $23 million in losses during its first three seasons of operation, according to financial statements released in September.
To help restructure Bonfante Gardens’ debt, the Gilroy City Council in August unanimously approved the park’s request for 99 housing permits on 33 acres, an exception to the city’s growth-control law. Kraemer said revenues from the home sales will reduce the park’s current debt to a more-manageable $14 million. City approvals for those housing units – a precondition for any sale – are expected by the middle of 2005, according to Kraemer.
While Bonfante has made good on the first installment of its quarterly interest payments, some creditors remain anxious.
Bondholder Bud Byrnes, a former state-level technical adviser on municipal bonds, represents holders of $2 million worth of Bonfante Gardens’ debt.
He explained that November payments on the bonds, which earn 8.15 percent interest, came from the park’s reserve funds.
He said financiers of the project told him there should be enough reserve left to cover the next interest payments in May 2005.
Kraemer confirmed Bonfante used the reserve to cover November payments, but declined to specify how much remained in the account. He would not say how Bonfante would finance the May 2005 payments.
“It’s very important to get the [housing] lots sold before May,” said Byrnes, who otherwise would favor foreclosure and sale of the property.
While acknowledging there was some built-in risk in purchasing the bonds, Byrnes views the matter in terms of fairness, with the interest of creditors coming first.
“Bondholders didn’t descend on Gilroy looking to rape and pillage,” he said. “Gilroy came to the market with unrated bonds using the land as security.”
Kraemer remained optimistic about Bonfante Gardens’ ability to remain open: “The restructure plan assumes that we will have the funds and we truly intend to complete the process.”
