Miscellaneous
LAw OFFICES
ROSE, SUNDSTROM & BENTLEY, LLP
2548 BLAIRSTONE PINES DRIVE
TALLAHASSEE, FLORIDA 32301
CHRIS H. BENTLEY, P.A.
ROBERT C. BRANNAN
F. MARsHAll DETERDING
MAlmN S. FRIEDMAN, P.A.
JOHN R. JENKINS, P.A.
STEVEN T. MINDUN, P.A.
DAREN L. SHIPPY
WILLIAM E. SUNDSTROM, P.A.
DIANE D. TREMOR, P.A.
JOHN L. WHARTON
ROBERT M. C. ROSE, OF COUNSEL
WAYNE L. SCHlI1,!'EJ.BEIN,. OFCOUNsp. R b rt
NIT. James L. 0 e s
County Administrator
Monroe County
5100 College Road
w
Key West, Florida 33040
(850) 877-6555
Fax (850) 656-4029
www.rsbattorneys.com
October 18, 2002
CENTRAL FLORIDA OFFICE
650 S. NORTH LAKE BLVD., SUITE 420
ALTAMONTE SPRINGS, FLORDA 32701
(407) 830-6331
FAX (407) 830-8522
Re: North Key Largo Utility Corp.;
Bond Document Amendments
Our File No. 30026.05
Dear Jim:
In 1995, through the sponsorship of Monroe County, North Key Largo Utility Corp.
issued its $3,400,000 Industrial Development Revenue Bonds, Series 1995 to fund the
acquisition and upgrade of the wastewater facility serving the Ocean Reef area of Key
Largo. Since that time the Company has established a track record of quality wastewater
service aI1.d fiscal responsibility including timely payments to all bondholders.
As you are aware, in cooperation with the current Aqueduct Authority program of
water line replacement in the Ocean Reef area, the Utility is completing the installation of
a collection and transmission system to provide central wastewater service to 266 homes
currently served by septic tanks. The Company is grateful for County efforts to secure
State grant funds to offset the substantial cost of this project to local homeowners. In order
to meet FKAA' s construction schedule the Company was required to borrow $4,000,000
to finance the collection and h-ansmission system consh-uction, to be repaid by customers
upon connection to the central wastewater service.
This transaction highlighted the fairly restrictive language in the Company's Series
1995 bond documents regarding issuance of additional debt. Specifically, the Company
was required to subordinate the $4,000,000 borrowing, which in turn required a guarantee
by related parties, all of which would have been unnecessary with a more customary
additional bonds test in the documents. Enclosed is all. excerpt from the amendment to the
bond documents which provides for issuance of parity debt based on a standard debt
Mr. James L. Roberts
October 18, 2002
Page 2
service coverage test. With this additional debt test, the Company will be able to rely on
its own financial strength to incur future debt. Under such test, the Company must be able
to demonstrate that revenues will support repayment of the new debt as well as continued
timely payments to the existing bondholders. This provision is common in municipal bond
documents, and may be used by the County in its financing documents.
The Company comes now to the County and the bondholders to approve this
change for two reasons. First, the entire $4,000,000 short term borrowing to fund the
current collection system program may not be repaid by the customers this year. In that
case, the Company would like to be in a position to refinance the remaining debt. Second,
it can be anticipated that future capital improvements to the wastewater facilities to
upgrade treahnent or extend service will be required, and the Company must plan now
for future borrowings to fund these projects. Prudent management dictates that the
Company know the terms and conditions under which it can borrow money.
We believe the document change will contribute to the Company's financial
stability and allow for future financings similar in structure to those undertaken by other
utility service providers. We further believe the bondholders, most of whom reside in Key
Largo, will support this change based on their confidence in Utility operations, and their
interest in continued protection of the environment in the Keys. I hope this letter is helpful
in your understanding of our request. Following your review, please schedule this matter
for consideration by the Commission. In the meantime should you or other members of
the Commission or County staff have any questions regarding these matters, please feel
free to contact Paul Winkeljohn at 305-367-3067 or me at 1-888-877-6555. Thank you for
vour attention to this matter.
.I
Sincerely,
JRJ:wjl
Enclosures
cc: Mr. Danny Kolhage
Rob Wolfe, Esq.
Steve Miller, Esq.
Mr.PauIWll1ke~ohn
Mr. David Ritz
Northkey\2002 Bond Doc Amends\Robertsl01802ltr
1-(2 /7L-
q JOhnR~
For the Firm
Rose, Sundstrom & Bentley, LLP
2548 Blairslone Pines Drive. Tallahassee. Florida 32301
8. A written opinion of counsel to the Borrower, reasonably satisfactory to
the Trustee, to the effect that the amendments or supplements to the
Agreement and any Additional Notes have been duly authorized, executed
and delivered by the Borrower; and that those documents, as so amended
or supplemented, and any Additional Notes constitute legal, valid and
binding obligations of the Borrower, enforceable in accordance with their
respective terms, subject to exceptions reasonably satisfactory to the
Trustee for ban1cruptcy, insolvency and similar laws and the application of
equitable principles.
Notwithstanding the foregoing, no series of Additional Bonds shall be issued
unless immediately following the issuance of such Additional Bonds, the Borrower is in
compliance with all terms, conditions and covenants of the Agreement.
When the documents listed above have been received by the Trustee, and the
Additional Bonds have been executed and authenticated, the Trustee shall deliver the Additional
Bonds to or on the order of the Original Purchaser thereof, but only upon payment to the Trustee
of the specified amount (including without limitation, any accrued interest) set forth in the
request and authorization to which reference is made in paragraph 5 above.
SECTION 2.05. Parity Debt. Notwithstanding anv other provisions of this
Indenture, the Bon'ower. upon satisfaction of those conditions specified below. mav incur Parity
Debt fTOm time to time for any lawful purpose.
A. The obligations evidencin!! an issue of Paritv Debt shall be on a parity with
the Series 1995 Bonds and any Additional Bonds or Parity Debt theretofore or thereafter issued
and outstanding as to the assi21lment to the Trustee of the Issuer's right title and interest in the
R.evenues, the Agreement. the Bond Fund and the monevs and investments therein.
B. Prior to the issuance of any Parity Debt. the following conditions shall be met:
1. There shall have been obtained and filed \\'ith the Issuer and the Trustee a
certificate of an independent ceIiified public accountant: (a) statinf? that the books and records of
the BOlTower relating to the collection and receipt of Utility Revenues have been reviewed bv
him: (b) statin!! that the Net Utility Revenues for anv 12 consecutive months out of the 24 month
period immediately pleceding the proposed date of delivery of such Paritv Debt with respect to
which such certificate is made, equal at least 1.10 times the Maximum Debt Service Requirement
on Ii) all Bonds, Additional Bonds. if any. and Parity Debt. if any, then outstal1dinQ: and (m the
Parity Debt with respect to which such certificate is made, taking into account any adjustments
made by the Consulting En!!ineers pursuant to paragraph (2) below.
2. If desirable. the Net Revenues for such 12 month period may be adiusted by
the ConsultinQ: Engineers as follows: (a) to reflect fOT such period chan!!es made in the rates.
fees. rentals or other charges for the operation of the System during the preceding 24 months;
and (b) to reflect any ChaJ.l!!C in such Net lJtility Revenues caused bv anv new customers of the
Svstem having been provided service subsequent to the date of commencement of such
preceding period and prior to the date of such certification provided for in paragraph (l ) above.
32:."7 /rmr::99l2 /'TIl'J:T IHDilll'Fu";-" J 10 J 5-TI-Amended.Reslated.
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3. The annual average of Net Utilitv Revenues. as estimated in \Witing: bv the
Consultinf;! Engineers. to be derived by the Borrower fiom the operation oftlle System in each of
the 3 vears immediately succeedim! the estimated date of completion and placing in operation of
the proiect to be financed by the issuance of such Parity Debt, will equal at least 1.10 times the
Maximmll Debt Service Requirement on (a) all Bonds. Additional Bonds. if anv. and Parity
Debt if any. then outstanding and (b) the Patitv Debt with respect to which such certificate is
made.
4. The Bon-ower shall not be in breach of its covenants and obligations assumed
hereunder and under the Agreement. nor shall any Event of Default hereunder have occurred or
be continuing. and all paynlents herein required to have been made into the funds and accounts.
as provided hereunder. shall have been made to the full extent required.
5. The conditions specified in paragraphs L 2 and 3 above are not applicable to
Paritv Debt issued to refund outstanding Parity Debt as long as the issuance of such Parity Debt
does not result in an increase in the ag!!regate amount of debt service pavments that would
otherwise be due on the outstandinf! Bonds and Paritv Debt in the current and all subsequent
years.
1. Copies of the financing documents entered into by the Bon'ower in
connection with the Paritv Debt which are necessary to provide that the Parity Debt will be
issued in compliance with Section 2.05 of this Indenture.
2. A written opinion of counsel to the Bon-ower or Bond CounseL to the
effect that all conditions precedent to the deliverv of the Parity Debt under this Indenture have
been fulfilled. and that the Parity Debt and a11 obligations with respect to the payment thereof
constitute legal. valid and binding obligations of the Bon-ower. enforceable in accordance ,vith
their respective terms. subiect to exceotions reasonablv satisfactorv to the Trustee for
bankruptcy. insolvency and similar laws and the application of equitable principles.
Nonvithstanding the foregoing. no Parity Debt shall be issued unless immediately
following such issuance. the Borrawer is in comnliance with all terms. conditions and covenants
of the Loan Agreement.
(End of Article II)
32 ~7 /rIOlrS90:'2:'f':1U:JT nmErlTUFw:; :: 101 5-TI-Amended-Restatcq
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