Georgia’s Effingham County IDA extends tender offer for 2011A bonds

By Angela McDaniels

Tacoma, Wash., July 1 – Effingham County Industrial Development Authority of Georgia extended the tender offer for its $16.81 million outstanding series 2011A refunding revenue bonds to 5 p.m. ET on July 12 from 5 p.m. ET on June 29.

Holders are being offered 109% of par for the authority’s 4.5% bonds due 2036 and 110% of par for its 4.625% bonds due 2041 plus in each case accrued interest up to but excluding the settlement date, expected to be Aug. 4.

The authority plans to fund the repurchase with the proceeds of a series of taxable bonds that is expected to close Aug. 3, according to a bondholder notice.

The authority is looking to purchase no less than $12,785,000 of the bonds. If it is unable to do so, then it will seek a closing agreement with the Internal Revenue Service according to the IRS’ Voluntary Closing Agreement Program in an effort to preserve the federal tax-exempt status of the interest on the bonds.

The authority said that if the IRS refuses to grant it a closing agreement through the program or if the authority and the IRS are unable to agree to settlement terms, then the IRS might initiate an audit of the bonds and might challenge the bonds’ tax-exempt status.

Background

The authority issued the bonds and $23,185,000 of series 2011B taxable refunding revenue bonds on Sept. 14, 2011. The authority said that at the time, it received a legal opinion that the interest on the bonds is excludable from the gross income of bondholders for federal income tax purposes.

The authority applied the proceeds of the bonds to finance and refinance the acquisition of unimproved land located in Rincon, Ga., and in Meldrim, Ga. The authority allocated the cost of refinancing the Rincon and Meldrim tracts between the bonds and the taxable bonds based on the expected use of the tracts. In general, the authority refinanced the cost of the portion of the Rincon tract and Meldrim tract that it expected to own and use for a period of at least 10 years with proceeds of the bonds, and it refinanced the remaining portions with proceeds of the taxable bonds, according to the notice.

Then in March, a private business enterprise approached the authority about a long-term development arrangement for about 2,628 acres of the Rincon tract. The authority had used proceeds of the bonds to refinance the property.

The authority is making the tender offer to purchase a portion of bonds used to refinance the property following consultation with its special tax counsel and to ensure no change in the tax-exempt status of the interest on the bonds.

The information and tender agent is Globic Advisors (contact Robert Stevens as 212 227-9699 or rstevens@globic.com).

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