OFFICIAL STATEMENT DATED NOVEMBER 28, 2012
$65,025,000
Pennsylvania Higher Educational Facilities Authority Revenue Bonds
(Shippensburg University Student Services, Inc. Student Housing Project at Shippensburg University of Pennsylvania),
Series 2012 NEW ISSUE—BOOK ENTRY ONLY
Dated: Date of Issue
Ratings: Moody’s: “Baa3” S&P: “BBB-” (See “RATINGS” herein)
Due: April 1 and October 1, as shown inside
In the opinion of Bond Counsel, under existing law and assuming continuing compliance by the Issuer and the Corporation with certain covenants intended to assure continuing compliance with the Internal Revenue Code of 1986, as amended (the “Code”), and all applicable regulations thereunder, interest on the Series 2012 Bonds (including any original issue discount properly allocable to the owner of a Series 2012 Bond) is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; provided, however, for the purpose of computing the alternative minimum tax imposed on certain corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings. Furthermore, in the opinion of Bond Counsel, under existing law, the Series 2012 Bonds are exempt from Pennsylvania personal property taxes and the interest on the Series 2012 Bonds is exempt from Pennsylvania personal income tax and corporate net income tax. For a discussion of other federal tax consequences arising with respect to the Series 2012 Bonds, see “TAX EXEMPTION AND OTHER TAX MATTERS.”
The $65,025,000 Pennsylvania Higher Educational Facilities Authority Revenue Bonds (Shippensburg University Student Services, Inc. Student Housing Project at Shippensburg University of Pennsylvania), Series 2012 (the “Series 2012 Bonds”) are being issued by the Pennsylvania Higher Educational Facilities Authority (the “Issuer”), and the proceeds of the Series 2012 Bonds are being loaned to Shippensburg University Student Services, Incorporated (the “Corporation”), a Pennsylvania not for profit corporation, pursuant to a Loan Agreement dated as of July 1, 2011 between the Issuer and the Corporation (the “Original Loan Agreement”), as amended and supplemented by a First Supplemental Loan Agreement dated as of December 1, 2012 between the Issuer and the Corporation (the “First Supplemental Loan Agreement” and, together with the Original Loan Agreement, the “Loan Agreement”). The Series 2012 Bonds are being issued to provide funds for (i) the acquisition, construction, equipping and furnishing of a student housing complex on the campus of Shippensburg University of Pennsylvania (the “University”) of the Pennsylvania State System of Higher Education (the “System”) in Shippensburg, Pennsylvania (the “Commonwealth”) on land leased by the Corporation from the University, consisting of approximately 922 beds, together with other related facilities and improvements, and demolition of certain existing facilities (collectively, the “2012 Project Facilities”), (ii) the payment of capitalized interest on the Series 2012 Bonds during and for up to six months following the scheduled completion of construction of the 2012 Project Facilities, (iii) the funding of the Debt Service Reserve Fund (as defined hereinafter), and (iv) the payment of all or a portion of the costs of issuance of the Series 2012 Bonds.
The Bonds will be issued in fully registered form, registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”), which will act as securities depository for the Series 2012 Bonds. Individual purchases of beneficial ownership interests in the Series 2012 Bonds will be made in book entry form only, and individual purchasers will not receive physical delivery of bond certificates. Payments of the principal of, and interest on, the Series 2012 Bonds will be made by Manufacturers and Traders Trust Company, as trustee (the “Trustee”), to Cede & Co., as nominee for DTC, for disbursement to DTC participants and subsequent disbursement to the beneficial owners of the Series 2012 Bonds.
The Series 2012 Bonds are issuable as fully registered bonds without coupons in denominations of $5,000 and any integral multiple thereof. The Series 2012 Bonds will bear interest from their date of issue, payable semiannually on each October 1 and April 1, commencing April 1, 2013.
THE SERIES 2012 BONDS AND THE INTEREST PAYABLE THEREON ARE LIMITED
OBLIGATIONS OF THE ISSUER AND THE BONDS DO NOT CONSTITUTE A GENERAL DEBT OR
LIABILITY OF THE ISSUER NOR A DEBT OR LIABILITY OF THE COMMONWEALTH OR OF ANY
POLITICAL SUBDIVISION THEREOF (INCLUDING WITHOUT LIMITATION THE UNIVERSITY
AND THE STATE SYSTEM OF WHICH THE UNIVERSITY IS A PART) OTHER THAN THE ISSUER
(BUT ONLY TO THE EXTENT OF THE TRUST ESTATE) OR A PLEDGE OF THE FAITH AND CREDIT
OF THE ISSUER OR OF THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION THEREOF
(INCLUDING WITHOUT LIMITATION THE UNIVERSITY AND THE STATE SYSTEM), BUT SHALL
BE PAYABLE SOLELY FROM THE TRUST ESTATE IN ACCORDANCE WITH THE INDENTURE.
THE ISSUANCE OF THE SERIES 2012 BONDS UNDER THE PROVISIONS OF THE ACT DOES NOT
DIRECTLY, INDIRECTLY OR CONTINGENTLY OBLIGATE THE COMMONWEALTH OR ANY
POLITICAL SUBDIVISION THEREOF (INCLUDING WITHOUT LIMITATION THE UNIVERSITY
AND THE STATE SYSTEM) TO LEVY ANY FORM OF TAXATION FOR THE PAYMENT THEREOF
OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT AND SUCH BONDS AND THE
INTEREST PAYABLE THEREON DO NOT NOW AND SHALL NEVER CONSTITUTE A DEBT OF
THE COMMONWEALTH WITHIN THE MEANING OF THE CONSTITUTION OR THE STATUTES
OF THE COMMONWEALTH AND DO NOT NOW AND SHALL NEVER CONSTITUTE A CHARGE
AGAINST THE CREDIT OR TAXING POWER OF THE COMMONWEALTH OR ANY POLITICAL
SUBDIVISION THEREOF (INCLUDING WITHOUT LIMITATION THE UNIVERSITY AND THE
STATE SYSTEM). THE ISSUER HAS NO TAXING POWER. THE COMMONWEALTH SHALL NOT
IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY,
OR INTEREST ON THE SERIES 2012 BONDS OR FOR THE PERFORMANCE OF ANY PLEDGE,
MORTGAGE, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER WHICH MAY
BE UNDERTAKEN BY THE ISSUER. NO BREACH BY THE ISSUER OF ANY SUCH PLEDGE,
MORTGAGE, OBLIGATION OR AGREEMENT MAY IMPOSE ANY LIABILITY, PECUNIARY OR
OTHERWISE, UPON THE COMMONWEALTH OR ANY CHARGE UPON ITS GENERAL CREDIT
OR AGAINST ITS TAXING POWER.
The Series 2012 Bonds are subject to prior mandatory, optional, and extraordinary redemption as described herein. See “THE SERIES 2012 BONDS” herein.
SEE “CERTAIN BONDHOLDERS’ RISKS” HEREIN FOR A DISCUSSION OF CERTAIN RISKS FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES 2012 BONDS. EACH PROSPECTIVE INVESTOR SHOULD CONSIDER THE RISKS INVOLVED TO DETERMINE THE SUITABILITY OF INVESTING IN THE SERIES 2012 BONDS.
This cover page is for quick reference only. It is not a summary of this Official Statement. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.
The Series 2012 Bonds are offered when, as, and if issued by the Issuer and received by the Underwriter and are subject to prior sale and the approval of legality by Cohen & Grigsby, P.C., Pittsburgh, Pennsylvania, Bond Counsel, and to certain other conditions. Certain legal matters will be passed upon for the Issuer by Buchanan Ingersoll & Rooney PC, for the Corporation by Pecht & Associates, Mechanicsburg, Pennsylvania, for the University by Florio Perrucci Steinhardt & Fader, LLC, Bethlehem, Pennsylvania and for the Underwriter by Ballard Spahr LLP, Baltimore, Maryland. Delivery of the Series 2012 Bonds through the facilities of DTC in New York, New York is expected on or about December 13, 2012.
$1,090,000 4.000% Term Bonds Due October 1, 2016 Yield 2.070% CUSIP No: 70917SCT8** $1,090,000 4.000% Term Bonds Due October 1, 2017 Yield 2.240% CUSIP No: 70917SCU5** $1,120,000 4.000% Term Bonds Due October 1, 2018 Yield 2.480% CUSIP No: 70917SCV3** $1,165,000 4.000% Term Bonds Due October 1, 2019 Yield 2.700% CUSIP No: 70917SCW1** $1,210,000 4.000% Term Bonds Due October 1, 2020 Yield 2.930% CUSIP No: 70917SCX9** $2,575,000 4.000% Term Bonds Due October 1, 2022 Yield 3.330% CUSIP No: 70917SCY7** $1,365,000 4.000% Term Bonds Due October 1, 2023 Yield 3.450%* CUSIP No: 70917SCZ4** $11,620,000 5.000% Term Bonds Due October 1, 2030 Yield 3.680%* CUSIP No: 70917SDA8** $11,135,000 5.000% Term Bonds Due October 1, 2035 Yield 3.920%* CUSIP No: 70917SDB6** $32,655,000 5.000% Term Bonds Due October 1, 2044 Yield 4.090%* CUSIP No: 70917SDC4**
____________________
*Yield shown to first optional redemption date.
**Copyright 2012, American Bankers Association. CUSIP data herein are provided by Standard & Poor’s, CUSIP Service Bureau, a division of the McGraw-Hill Companies, Inc. CUSIP numbers are included solely for the convenience of the holders of the Series 2012 Bonds and the Issuer, the Underwriter and the Corporation who are not responsible for the selection, uses or correctness (as listed above) of, or subsequent changes to, CUSIP numbers assigned to the Series 2012 Bonds.
SERIES 2012 BONDS MATURITY SCHEDULE
PENNSYLVANIA HIGHER EDUCATIONAL FACILITIES AUTHORITY
1035 Mumma Road Wormleysburg, PA 17043
Members of the Board
Honorable Thomas W. Corbett ... President Governor of the Commonwealth of Pennsylvania
Honorable Jeffrey E. Piccola ... Vice President Designated by the President Pro Tempore of the Senate
Honorable Andrew E. Dinniman. ... Vice President Designated by the Minority Leader of the Senate
Honorable John C. Bear ... Vice President Designated by the Speaker of the House of Representatives
Honorable Robert M. McCord ... Treasurer State Treasurer
Honorable Sheri L. Phillips ... Secretary Secretary of General Services
Honorable Anthony M. DeLuca... Board Member Designated by the Minority Leader of the House of Representatives
Honorable Jack E. Wagner ... Board Member Auditor General
Honorable Ronald J. Tomalis ... Board Member Secretary of Education
EXECUTIVE DIRECTOR
Robert Baccon
COUNSEL TO THE ISSUER
(Appointed by the Office of General Counsel) Buchanan Ingersoll & Rooney PC
Pittsburgh, Pennsylvania
TRUSTEE
Manufacturers and Traders Trust Company
BOND COUNSEL
(Appointed by the Office of General Counsel) Cohen & Grigsby, P.C.
Pittsburgh, Pennsylvania
UNDERWRITER
No dealer, broker, salesman, or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations should not be relied upon as having been authorized by the Issuer, the Corporation, or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2012 Bonds by any person in any state in which it is unlawful for such person to make such offer, solicitation, or sale.
The information set forth herein has been obtained from the Issuer, the Corporation, the University or other sources that are deemed to be reliable, but is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation of, the Underwriter. The information herein is subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create an implication that there has been no change in the affairs of the Corporation since the date hereof. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
The Issuer has provided only that information in this Official Statement that is contained under the heading “THE ISSUER” and, as to the Issuer, under the heading “LITIGATION.” The Issuer has not furnished or verified any other information or statements contained in this Official Statement and is not responsible for the sufficiency, completeness, or accuracy of such other information or statements.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2012 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
TABLE OF CONTENTS
Page
INTRODUCTORY STATEMENT ... 1
THE SERIES 2012 BONDS ... 4
SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2012 BONDS ... 13
THE MORTGAGE ... 20
THE ISSUER ... 20
THE PROJECT FACILITIES ... 21
THE GROUND LEASE ... 23
THE COOPERATION AGREEMENT ... 27
THE DEVELOPER ... 28
THE DEVELOPMENT AGREEMENT ... 29
THE MANAGER AND THE MANAGEMENT AGREEMENT ... 29
THE GENERAL CONTRACTOR ... 30
THE ARCHITECT ... 30
THE CORPORATION ... 30
NONRECOURSE OBLIGATION OF THE CORPORATION ... 31
THE UNIVERSITY ... 31
UNIVERSITY NOT LIABLE FOR SERIES 2012 BONDS ... 36
CASH FLOW FORECAST ... 36
ANNUAL DEBT SERVICE REQUIREMENTS ... 38
MARKET STUDY ... 39
THE TRUSTEE ... 39
CERTAIN BONDHOLDERS’ RISKS ... 39
LITIGATION ... 47
TAX EXEMPTION AND OTHER TAX MATTERS... 47
LEGALITY FOR INVESTMENT ... 48
UNDERWRITING ... 49 RATINGS ... 49 LEGAL MATTERS ... 49 RELATIONSHIP OF PARTIES ... 50 CONTINUING DISCLOSURE ... 50 MISCELLANEOUS ... 50
APPENDIX A MARKET STUDY
APPENDIX B FORM OF AMENDED AND RESTATED COOPERATION
AGREEMENT
APPENDIX C SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
AND LOAN AGREEMENT
APPENDIX D FORM OF BOND COUNSEL OPINION
OFFICIAL STATEMENT
$65,025,000
PENNSYLVANIA HIGHER EDUCATIONAL FACILITIES AUTHORITY REVENUE BONDS
(SHIPPENSBURG UNIVERSITY STUDENT SERVICES, INC. STUDENT HOUSING PROJECT AT SHIPPENSBURG UNIVERSITY OF PENNSYLVANIA),
SERIES 2012
INTRODUCTORY STATEMENT
This Official Statement, including the cover page and the Appendices hereto, is provided to furnish certain information in connection with the sale by the Pennsylvania Higher Educational Facilities Authority (the “Issuer”) of its $65,025,000 Pennsylvania Higher Educational Facilities Authority Revenue Bonds (Shippensburg University Student Services, Inc. Student Housing Project at Shippensburg University of Pennsylvania), Series 2012 (the “Series 2012 Bonds”), to be issued by the Issuer pursuant to a Trust Indenture dated as of July 1, 2011 (the “Original Indenture”) between the Issuer and Manufacturers and Traders Trust Company, as trustee (the “Trustee”), as amended and supplemented by the First Supplemental Trust Indenture dated as of December 1, 2012 between the Issuer and the Trustee (the “First Supplemental Indenture” and, together with the Original Indenture, the “Indenture”), for the purpose of providing funds for (a) the acquisition, construction, equipping and furnishing of a student housing complex on the campus of Shippensburg University of Pennsylvania (the “University”) of the Pennsylvania State System of Higher Education (the “System” or the “State System”) in Shippensburg, Pennsylvania, on land leased by Shippensburg University Student Services, Incorporated (the “Corporation”) from the University, consisting of approximately 922 beds, together with other related facilities and improvements, and demolition of certain existing facilities (collectively, the “2012 Project Facilities” or the "Phase II Project Facilities"), (b) the payment of capitalized interest on the Series 2012 Bonds during and for up to six months following the scheduled completion of all construction of the 2012 Project Facilities, (c) the funding of the Debt Service Reserve Fund (as hereinafter defined), and (d) the payment of all or a portion of the costs of issuance of the Series 2012 Bonds (collectively, the “Series 2012 Project”). Definitions of certain terms used in this
Official Statement are set forth in Appendix C hereto.
The Series 2012 Bonds will be equally and ratably secured with the $69,760,000 Pennsylvania Higher Educational Facilities Authority Revenue Bonds (Shippensburg University Student Services, Inc. Student Housing Project at Shippensburg University of Pennsylvania), Series 2011 (the “Series 2011 Bonds” and, together with the Series 2012 Bonds, the “Issued Bonds”) to the extent the Series 2011 Bonds are outstanding. The Series 2011 Bonds were issued in order to, among other things, finance the cost of acquiring, demolishing, constructing, furnishing and equipping a 924-bed student housing facility (the “2011 Project Facilities” and, together with the 2012 Project Facilities and any other facilities financed with Additional Bonds, the “Project Facilities”). The Issued Bonds and any Additional Bonds which may be Outstanding from time to time under the Indenture are referred to collectively herein as “Bonds”. As of October 15, 2012, there was an aggregate of $69,760,000 in principal amount of Series 2011 Bonds outstanding. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2012 BONDS” herein.
The Issuer will lend the proceeds of the Series 2012 Bonds to the Corporation pursuant to a Loan Agreement dated as of July 1, 2011 between the Issuer and the Corporation (the “Original Loan Agreement”), as amended and supplemented by a First Supplemental Loan Agreement dated as of December 1, 2012 by and between the Issuer and the Corporation (the “First Supplemental Loan Agreement” and, together with the Original Loan Agreement, the “Loan Agreement”). The Corporation will be obligated pursuant to the Loan Agreement to pay to the Issuer such payments as will always be sufficient to pay when due the principal of, premium, if any, and interest on the Series 2012 Bonds. Under the Loan Agreement, it is the obligation of the Corporation, among other things, to keep the Project Facilities properly insured and to pay all taxes, assessments, and other charges levied or assessed against or with respect to the Project Facilities. The Issuer shall have no responsibility for the operation, maintenance, condition or insuring of the 2012 Project Facilities or the Series 2012 Project.
The 2012 Project Facilities will be constructed on land leased to the Corporation by the University pursuant to a Ground Lease Agreement dated as of July 1, 2011 (the “Original Ground Lease”), as amended by the First Amendment to Ground Lease Agreement dated as of December 1, 2012 between the University and the Corporation (the “First Amendment to Ground Lease” and, together with the Original Ground Lease, the “Ground Lease”). The 2012 Project Facilities (together with the 2011 Project Facilities) will be managed by the University pursuant to an Amended and Restated Facility Management Agreement dated as of December 1, 2012 (the “Management Agreement”) by and between the University and the Corporation. See “THE MANAGER AND THE MANAGEMENT AGREEMENT” herein.
The obligations of the Corporation under the Loan Agreement will be secured by (a) an Open-Ended Leasehold Mortgage and Security Agreement dated as of July 1, 2011 (the “Original Mortgage”) from the Corporation to the Trustee, as amended by a First Amendment to Open-Ended Leasehold Mortgage and Security Agreement dated as of December 1, 2012 from the Corporation to the Trustee (the “First Mortgage Amendment” and, together with the Original Mortgage, the “Mortgage”), pursuant to which the Corporation has granted and will grant to the Trustee a first priority mortgage lien on the leasehold interest in the real property on which the Project Facilities, including the 2012 Project Facilities, have been or will be constructed and a first priority security interest in the Revenues, the Receivables and the Personalty (each as defined in Appendix D hereto) from or related to the Project Facilities and (b) an Assignment of Contract Documents dated as of December 1, 2012 (the “Assignment of Contract Documents”), pursuant to which the Corporation and Developer have granted to the Trustee a security interest in their respective rights under and interests in, among other documents, the Management Agreement, the Cooperation Agreement (as defined herein), the 2012 Development Agreement (as defined herein) (as to the Corporation only), the 2012 Construction Contract (as defined herein), the 2012 Architect Agreement (as defined herein), and other contracts relating to the construction and operation of the 2012 Project Facilities.
Pursuant to the Indenture, the Issuer will assign and grant a security interest in all of its rights under the Loan Agreement (except for Unassigned Rights, as hereinafter defined), the Mortgage, and the Assignment of Contract Documents and certain funds and accounts held under the Indenture to the Trustee which, on behalf of the owners of the Series 2012 Bonds, will exercise all of the Issuer’s rights with respect thereto (except for Unassigned Rights). See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2012 BONDS” herein and “ANNUAL DEBT SERVICE REQUIREMENTS”.
Pursuant to the terms of the Amended and Restated Cooperation Agreement dated as of December 1, 2012 by and between the University and the Corporation (the “Cooperation Agreement”), the University has agreed, among other things, but subject to the conditions set forth therein, not to direct or assign students or people attending camps, conferences and similar events occurring at the University on a priority basis and in preference over the Project Facilities. The University covenants and agrees in the Cooperation Agreement that, upon the completion of the 2011 Project Facilities and the 2012 Project Facilities and continuing thereafter for each successive Spring or Fall academic semester, the University will: (i) at its election, either take off-line or demolish all or a portion of the Existing Student Housing Facilities (as such term is defined below), and (ii) house students in existing on campus residence halls consistent with their respective original design capacity (together, clauses (i) and (ii), collectively, the “Restrictive Covenants”) such that the 2011 Project Facilities and the 2012 Project Facilities are at least ninety-five percent (95%) occupied for each subsequent Spring or Fall academic semester. For the avoidance of any doubt, the Corporation and the University acknowledge and agree in the Cooperation Agreement that if prior to the commencement of the then next to occur Spring or Fall academic semester, it is projected that the occupancy rate of the 2011 Project Facilities and the 2012 Project Facilities will be not less than ninety-five percent (95%), based upon commitments received by the University with respect to such Spring or Fall academic semester, then the University shall not be required to comply with the Restrictive Covenants with respect to such next to occur academic semester. The term “Existing Student Housing Facilities” shall mean the Seavers Apartments Residence Hall (three hundred eighty-seven (387) bed design capacity), the Lackhove Residence Hall (two hundred twenty-seven (227) bed design capacity), the Keiffer Residence Hall (two hundred thirty-one (231) bed design capacity), the McCune Residence Hall (one hundred twenty-six (126) bed design capacity), the Harley Residence Hall (two hundred and forty-eight (248) bed design capacity), and one of the following buildings: Mowrey Residence Hall (four hundred and twenty-four (424) bed design capacity), McLean Residence Hall (twenty-four hundred and thirty-one (431) bed design
capacity), or Naugle Residence Hall (four hundred and twenty-nine (429) bed design capacity), to the extent not already demolished in connection with University's Comprehensive Housing Plan (see “THE UNIVERSITY – Comprehensive Housing Plan” herein). See the proposed form of the Cooperation Agreement attached hereto as Appendix B.
This Official Statement and the Appendices hereto contain brief descriptions of, among other matters, the Issuer, the Corporation, the Developer, the Project, the Manager, the Project Facilities, the University, the Series 2012 Bonds, the Loan Agreement, the Ground Lease, the Mortgage, the Assignment of Contract Documents, the Indenture, the Cooperation Agreement, the Management Agreement and the 2012 Development Agreement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Loan Agreement, the Ground Lease, the Mortgage, the Assignment of Contract Documents, the Indenture, the Cooperation Agreement, the Management Agreement and the 2012 Development Agreement (collectively, the “Bond Documents”) are qualified in their entirety by reference to such documents, and references herein to the Series 2012 Bonds are qualified in their entirety to the forms thereof included in the Indenture.
THE SERIES 2012 BONDS AND THE INTEREST PAYABLE THEREON ARE LIMITED OBLIGATIONS OF THE ISSUER AND THE BONDS DO NOT CONSTITUTE A GENERAL DEBT OR LIABILITY OF THE ISSUER NOR A DEBT OR LIABILITY OF THE COMMONWEALTH OR OF ANY POLITICAL SUBDIVISION THEREOF (INCLUDING WITHOUT LIMITATION THE UNIVERSITY AND THE STATE SYSTEM OF WHICH THE UNIVERSITY IS A PART) OTHER THAN THE ISSUER (BUT ONLY TO THE EXTENT OF THE TRUST ESTATE) OR A PLEDGE OF THE FAITH AND CREDIT OF THE ISSUER OR OF THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION THEREOF (INCLUDING WITHOUT LIMITATION THE UNIVERSITY AND THE STATE SYSTEM), BUT SHALL BE PAYABLE SOLELY FROM THE TRUST ESTATE IN ACCORDANCE WITH THE INDENTURE. THE ISSUANCE OF THE SERIES 2012 BONDS UNDER THE PROVISIONS OF THE ACT DOES NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY OBLIGATE THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION THEREOF (INCLUDING WITHOUT LIMITATION THE UNIVERSITY AND THE STATE SYSTEM) TO LEVY ANY FORM OF TAXATION FOR THE PAYMENT THEREOF OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT AND SUCH BONDS AND THE INTEREST PAYABLE THEREON DO NOT NOW AND SHALL NEVER CONSTITUTE A DEBT OF THE COMMONWEALTH WITHIN THE MEANING OF THE CONSTITUTION OR THE STATUTES OF THE COMMONWEALTH AND DO NOT NOW AND SHALL NEVER CONSTITUTE A CHARGE AGAINST THE CREDIT OR TAXING POWER OF THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION THEREOF (INCLUDING WITHOUT LIMITATION THE UNIVERSITY AND THE STATE SYSTEM). THE ISSUER HAS NO TAXING POWER. THE COMMONWEALTH SHALL NOT IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2012 BONDS OR FOR THE PERFORMANCE OF ANY PLEDGE, MORTGAGE, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER WHICH MAY BE UNDERTAKEN BY THE ISSUER. NO BREACH BY THE ISSUER OF ANY SUCH PLEDGE, MORTGAGE, OBLIGATION OR AGREEMENT MAY IMPOSE ANY LIABILITY, PECUNIARY OR OTHERWISE, UPON THE COMMONWEALTH OR ANY CHARGE UPON ITS GENERAL CREDIT OR AGAINST ITS TAXING POWER.
SEE “CERTAIN BONDHOLDERS’ RISKS” HEREIN FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES 2012 BONDS. EACH PROSPECTIVE INVESTOR SHOULD CONSIDER THE RISKS INVOLVED TO DETERMINE THE SUITABILITY OF INVESTING IN THE SERIES 2012 BONDS.
The text of the Market Study (as defined herein) relating to the Project Facilities is attached hereto as Appendix A. The proposed form of the Cooperation Agreement between the University and the Corporation is attached hereto as Appendix B. Summaries of certain provisions of the Indenture and Loan Agreement and definitions of certain terms relating to the Series 2012 Bonds are attached hereto as Appendix C. The proposed
form of opinion of Bond Counsel is attached hereto as Appendix D. The proposed form of Continuing Disclosure Agreement is attached hereto as Appendix E.
ESTIMATED SOURCES AND USES OF FUNDS
The schedule below contains the estimated sources and uses of funds resulting from the sale of the Series 2012 Bonds (exclusive of accrued interest and investment earnings):
Series 2012 Bonds Sources of Funds:
Par Amount of Series 2012 Bonds $65,025,000.00
Proceeds from Series 2011 Bonds1 800,000.00
Net Original Issue Premium 5,241,923.40
Total Sources of Funds $71,066,923.40
Uses of Funds:
Deposit to 2012 Project Account of the Project Fund1 $59,338,478.00 Deposit to 2012 Capitalized Interest Account2 6,605,758.45
Deposit to Debt Service Reserve Fund3 4,178,456.25
Deposit to Clearing Fund for Costs of Issuance4 944,230.70
Total Uses of Funds $71,066,923.40
1
Includes amounts used to pay for the demolition of certain existing residence halls on the campus of the University, to reimburse certain development costs paid by the Corporation, and to pay certain capitalized fees to be paid during construction.
2
Expected to pay interest payments on the Series 2012 Bonds through and including October 1, 2014 and a portion of the interest payments on the Series 2012 Bonds through and including April 1, 2015.
3
Equal to the Reserve Requirement for the Issued Bonds. The Debt Service Reserve Fund secures the Series 2011 Bonds, the Series 2012 Bonds and any Additional Bonds unless provided otherwise in the Supplemental Indenture pursuant to which the Additional Bonds are issued.
4
Includes amounts to be paid for Trustee fees, rating agency fees, legal counsel fees, printing costs and other fees and expenses, including the Underwriter’s Discount.
THE SERIES 2012 BONDS
General Description
The Series 2012 Bonds will bear interest at the rates shown on the inside of the cover page of this Official Statement payable on April 1, 2013, and semiannually thereafter on October 1 and April 1 (the “Interest Payment Dates”) until paid, in an amount equal to the interest accrued from the most recent Interest Payment Date to which interest has been duly paid or provided for next preceding the date of authentication of each Bond, unless (i) authenticated on an Interest Payment Date on which interest has been paid or provided for, in which event it shall bear interest from such Interest Payment Date, (ii) authenticated prior to March 15, 2013, in which event it shall bear interest from its date, or (iii) authenticated after a Record Date but before the next succeeding Interest Payment Date, in which event it shall bear interest from such succeeding Interest Payment Date.
Interest on the Series 2012 Bonds will be computed on the basis of a 360-day year comprised of twelve 30-day months. The Series 2012 Bonds will be issued as fully registered bonds without coupons in the denominations of $5,000 and any integral multiple thereof (“Authorized Denominations”).
Payment of the Series 2012 Bonds
The principal of, premium, if any, and interest on the Series 2012 Bonds shall be payable in any currency of the United States of America which, at the respective dates of payment thereof, is legal tender for the payment of public and private debts, and such principal and premium, if any, shall be payable at the Principal Office of the Trustee upon presentation and surrender thereof.
Payment of the interest on any Bond shall be made to the person appearing on the Bond Register as the registered owner thereof as of the Record Date and shall be paid:
(i) by check of the Trustee mailed to such Bondholder on the Interest Payment Date at such Bondholder’s address as it appears on the Bond Register or at such other address as is furnished to the Trustee in writing by such owner;
(ii) in the case of an interest payment to any owner of $1,000,000 or more in aggregate principal amount of Series 2012 Bonds as of the close of business of the Trustee on the Record Date for a particular Interest Payment Date, by wire transfer to such Bondholder as of the close of business on such Interest Payment Date upon written notice from such Bondholder containing the wire transfer address (which shall be in the continental United States) to which such Bondholder wishes to have such wire directed, which written notice is received not less than one (1) Business Day prior to such Record Date; or
(iii) in such other fashion as is agreed upon between the Bondholder and the Trustee. When the date of maturity of interest on or principal of any Bond or the date fixed for redemption of any Bond is not a Business Day, then payment of such principal, premium, if any, or interest need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no additional interest shall be payable on such succeeding Business Day as a result of such deferral of payment.
Book-entry-only System for Series 2012 Bonds
The Indenture directs the Issuer, the Trustee, the Corporation and certain other persons to deem and treat the person in whose name any Bond is registered in accordance with the Indenture on the registration books maintained pursuant to the Indenture as the Owner thereof for all purposes. Notwithstanding the above, so long as the Series 2012 Bonds are held under a book-entry system, transfers and exchanges of beneficial ownership of the Series 2012 Bonds will be effected on the books of The Depository Trust Company (“DTC”), New York, New York or its successor as securities depository for the Series 2012 Bonds, pursuant to its rules and procedures.
The description that follows of the procedures and recordkeeping with respect to beneficial ownership interests in the Series 2012 Bonds, payments of principal of and premium, if any, and interest on the Series 2012 Bonds to DTC, its nominee, Direct and Indirect Participants (as defined below) or Beneficial Owners, confirmation and transfer of beneficial ownership interests in the Series 2012 Bonds and other bond-related transactions by and between DTC, Direct and Indirect Participants and Beneficial Owners is based solely on information furnished by DTC. None of the Issuer, the Trustee, the Corporation or the Underwriter
assumes any responsibility for the accuracy or adequacy of the information included in such description.
DTC will act as securities depository for the Series 2012 Bonds. The Series 2012 Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond certificate will be issued for each maturity of the Series 2012 Bonds, each in the aggregate principal amount of such issue, and will be deposited with DTC.
DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a rating from Standard & Poor’s of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.
Purchases of Series 2012 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2012 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2012 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2012 Bonds, except in the event that use of the book-entry system for the Series 2012 Bonds is discontinued.
To facilitate subsequent transfers, all Series 2012 Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Series 2012 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2012 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2012 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Series 2012 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2012 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of the Series 2012 Bonds may wish to ascertain that the nominee holding the Series 2012 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Series 2012 Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2012 Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2012 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Series 2012 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Issuer or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC (nor its nominee), the Trustee, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Series 2012 Bonds at any time by giving reasonable notice to the Issuer or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, bond certificates are required to be printed and delivered.
The Corporation may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, bond certificates will be printed and delivered.
So long as Cede & Co., or any successor thereto, is the registered owner of the Series 2012 Bonds, as DTC’s partnership nominee, references herein to the Bondholders or Owners or registered owners of the Series 2012 Bonds shall mean DTC and shall not mean the Beneficial Owners of the Series 2012 Bonds. During such period, the Trustee and the Issuer will recognize DTC or its partnership nominee as the owner of all of the Series 2012 Bonds for all purposes, including the payment of the principal of, premium, if any, and interest on the Series 2012 Bonds, as well as the giving of notices and voting.
THE ISSUER AND THE TRUSTEE WILL NOT HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANT OR ANY BENEFICIAL OWNER OF THE SERIES 2012 BONDS WITH RESPECT TO: (1) THE SERIES 2012 BONDS; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT; (3) THE PAYMENT OF ANY AMOUNT DUE TO ANY PARTICIPANT OR BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2012 BONDS; (4) THE DELIVERY BY DTC TO ANY DIRECT PARTICIPANT, OR BY ANY PARTICIPANT TO ANY BENEFICIAL OWNER OF ANY NOTICE WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE SERIES 2012 BONDS TO BE GIVEN TO BOND OWNERS; (5) THE SELECTION OF BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE SERIES 2012 BONDS; OR (6) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS BONDHOLDER.
Limited Obligations of the Issuer
THE SERIES 2012 BONDS, TOGETHER WITH INTEREST THEREON, SHALL BE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE, ON A PARITY WITH ALL OTHER BONDS OUTSTANDING UNDER THE INDENTURE, INCLUDING THE SERIES 2011 BONDS, SOLELY FROM THE TRUST ESTATE AND SHALL BE A VALID CLAIM OF THE HOLDERS THEREOF ONLY AGAINST THE TRUST ESTATE, WHICH IS BEING ASSIGNED AND PLEDGED UNDER THE INDENTURE FOR THE EQUAL AND RATABLE PAYMENT OF THE BONDS AND SHALL BE USED FOR NO OTHER PURPOSE THAN TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST
ON THE BONDS, EXCEPT AS MAY BE OTHERWISE EXPRESSLY AUTHORIZED IN THE INDENTURE.
THE SERIES 2012 BONDS AND THE INTEREST PAYABLE THEREON ARE LIMITED OBLIGATIONS OF THE ISSUER AND THE SERIES 2012 BONDS DO NOT CONSTITUTE A GENERAL DEBT OR LIABILITY OF THE ISSUER NOR A DEBT OR LIABILITY OF THE COMMONWEALTH OR OF ANY POLITICAL SUBDIVISION THEREOF (INCLUDING WITHOUT LIMITATION THE UNIVERSITY AND THE STATE SYSTEM OF WHICH THE UNIVERSITY IS A PART) OTHER THAN THE ISSUER (BUT ONLY TO THE EXTENT OF THE TRUST ESTATE) OR A PLEDGE OF THE FAITH AND CREDIT OF THE ISSUER OR OF THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION THEREOF (INCLUDING WITHOUT LIMITATION THE UNIVERSITY AND THE STATE SYSTEM), BUT SHALL BE PAYABLE SOLELY FROM THE TRUST ESTATE IN ACCORDANCE WITH THE INDENTURE. THE ISSUANCE OF THE SERIES 2012 BONDS UNDER THE PROVISIONS OF THE ACT DOES NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY OBLIGATE THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION THEREOF (INCLUDING WITHOUT LIMITATION THE UNIVERSITY AND THE STATE SYSTEM) TO LEVY ANY FORM OF TAXATION FOR THE PAYMENT THEREOF OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT AND SUCH BONDS AND THE INTEREST PAYABLE THEREON DO NOT NOW AND SHALL NEVER CONSTITUTE A DEBT OF THE COMMONWEALTH WITHIN THE MEANING OF THE CONSTITUTION OR THE STATUTES OF THE COMMONWEALTH AND DO NOT NOW AND SHALL NEVER CONSTITUTE A CHARGE AGAINST THE CREDIT OR TAXING POWER OF THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION THEREOF (INCLUDING WITHOUT LIMITATION THE UNIVERSITY AND THE STATE SYSTEM). THE ISSUER HAS NO TAXING POWER. THE COMMONWEALTH SHALL NOT IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2012 BONDS OR FOR THE PERFORMANCE OF ANY PLEDGE, MORTGAGE, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER WHICH MAY BE UNDERTAKEN BY THE ISSUER. NO BREACH BY THE ISSUER OF ANY SUCH PLEDGE, MORTGAGE, OBLIGATION OR AGREEMENT MAY IMPOSE ANY LIABILITY, PECUNIARY OR OTHERWISE, UPON THE COMMONWEALTH OR ANY CHARGE UPON ITS GENERAL CREDIT OR AGAINST ITS TAXING POWER.
NEITHER THE UNIVERSITY NOR THE STATE SYSTEM SHALL HAVE ANY RESPONSIBILITY OR LIABILITY, EXPRESS OR IMPLIED, WITH RESPECT TO THE INDENTURE, THE LOAN AGREEMENT, ANY OTHER BOND DOCUMENT, THE SERIES 2012 BONDS, OR ANY OTHER BONDS OR THE 2012 PROJECT OR ANY OTHER PROJECT.
Additional Bonds
So long as there is no Event of Default under the Indenture, Additional Bonds may be issued pursuant to the Indenture by the Issuer on a parity with the Issued Bonds upon the request of the Corporation to provide funds to pay any one or more of the following: (i) the costs of completing the 2011 Project or any other Project, (ii) the costs of making such additions or alterations to the 2011 Project Facilities including without limitation, construction, equipping and furnishing of the Phase II Project Facilities and/or the Phase III Project Facilities as the Corporation may deem necessary or desirable and as will not impair the nature of the 2011 Project Facilities as student housing facilities, (iii) the costs of refunding any Bonds, and (iv) in each such case, the costs of the issuance and sale of the Additional Bonds and capitalized or funded interest for such period and such other costs (including funding any reasonably required reserves) reasonably related to the financing as shall be agreed upon by the Corporation and the Issuer. Any Additional Bonds shall be issued on a parity with the Issued Bonds and any Additional Bonds theretofore or thereafter issued, shall be secured by the lien and security interests granted by the Mortgage, equally and ratably with the Issued Bonds and any Additional Bonds theretofore or thereafter issued, and shall be payable from the sources provided in the Indenture. In connection with the issuance of Additional Bonds, a deposit shall be made to the Debt Service Reserve Fund in an amount sufficient to cause the amount on deposit in the Debt Service Reserve Fund to be equal to the Reserve Requirement for all Bonds then outstanding.
Any Additional Bonds may be issued only upon receipt by the Trustee prior to the issuance of such Additional Bonds of (i) written evidence of compliance by the Corporation with the applicable requirements set forth in the Loan Agreement for the issuance of additional debt, and (ii) written evidence that the rating of any Rating Agency on any Outstanding Bonds will not be reduced or withdrawn as a result of the issuance of such Additional Bonds.
The issuance of Additional Bonds shall, in all instances, be subject to the satisfaction of such other additional conditions not inconsistent with the foregoing provisions of this Section as shall be determined by the underwriter or placement agent selling or placing such Additional Bonds and/or by any issuer of a credit or liquidity facility in support of such Additional Bonds.
Redemption
Optional Redemption. The Series 2012 Bonds maturing on or after October 1, 2023 shall be subject to redemption at the option of the Issuer, upon the Written Request of the Corporation, on or after October 1, 2022, in whole or in part at any time at a redemption price equal to 100% of the principal amount of the Series 2012 Bonds to be redeemed, plus interest, if any, accrued thereon from the most recent Interest Payment Date to the date fixed for redemption.
Extraordinary Redemption. The Issuer shall, upon the Written Request of the Corporation, given to the Issuer and the Trustee, redeem the Series 2012 Bonds in whole, at any time, or in part on any Interest Payment Date, but only from Net Proceeds deposited to the Bond Fund in such amount as is determined pursuant to the Indenture as a result of damage to, destruction or condemnation of or taking under the power of eminent domain of all or a substantial portion of the Real Estate, at a redemption price equal to 100% of the principal amount thereof together with interest, if any, accrued on such Series 2012 Bonds from the most recent Interest Payment Date to the date fixed for redemption. Any such partial redemption shall be effected on a pro rata basis across all maturities of the Series 2012 Bonds and otherwise shall be made in accordance with the provisions of the Indenture.
Mandatory Sinking Fund Redemption. The Issuer shall redeem the Series 2012 Bonds prior to maturity in part by lot, as selected by the Trustee, on April 1 and October 1 of each year as set forth below, in the respective principal amounts listed opposite each such year, at a redemption price equal to 100% of the principal amount thereof plus interest accrued thereon from the most recent Interest Payment Date to the date fixed for redemption:
Series 2012 Bonds Maturing on October 1, 2016 Date Principal Amount
April 1, 2016 $545,000
October 1, 2016 545,000*
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*
Final Maturity.
Series 2012 Bonds Maturing on October 1, 2017 Date Principal Amount
April 1, 2017 $545,000
October 1, 2017 545,000*
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*
Series 2012 Bonds Maturing on October 1, 2018 Date Principal Amount
April 1, 2018 $555,000
October 1, 2018 565,000*
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*
Final Maturity.
Series 2012 Bonds Maturing on October 1, 2019 Date Principal Amount
April 1, 2019 $575,000
October 1, 2019 590,000*
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*
Final Maturity.
Series 2012 Bonds Maturing on October 1, 2020 Date Principal Amount
April 1, 2020 $600,000
October 1, 2020 610,000*
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*
Final Maturity.
Series 2012 Bonds Maturing on October 1, 2022 Date Principal Amount
April 1, 2021 $625,000 October 1, 2021 635,000 April 1, 2022 650,000 October 1, 2022 665,000* ____________________ * Final Maturity.
Series 2012 Bonds Maturing on October 1, 2023 Date Principal Amount
April 1, 2023 $675,000
October 1, 2023 690,000*
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*
Series 2012 Bonds Maturing on October 1, 2030 Date Principal Amount
April 1, 2024 $705,000 October 1, 2024 720,000 April 1, 2025 740,000 October 1, 2025 760,000 April 1, 2026 775,000 October 1, 2026 795,000 April 1, 2027 815,000 October 1, 2027 835,000 April 1, 2028 855,000 October 1, 2028 880,000 April 1, 2029 900,000 October 1, 2029 925,000 April 1, 2030 945,000 October 1, 2030 970,000* ____________________ * Final Maturity.
Series 2012 Bonds Maturing on October 1, 2035 Date Principal Amount
April 1, 2031 995,000 October 1, 2031 1,020,000 April 1, 2032 1,045,000 October 1, 2032 1,070,000 April 1, 2033 1,095,000 October 1, 2033 1,125,000 April 1, 2034 1,155,000 October 1, 2034 1,180,000 April 1, 2035 1,210,000 October 1, 2035 1,240,000* ____________________ * Final Maturity.
Series 2012 Bonds Maturing on October 1, 2044
Date Principal Amount Date Principal Amount
April 1, 2036 $1,270,000 October 1, 2040 $1,590,000 October 1, 2036 1,305,000 April 1, 2041 1,630,000 April 1, 2037 1,335,000 October 1, 2041 1,670,000 October 1, 2037 1,370,000 April 1, 2042 1,710,000 April 1, 2038 1,405,000 October 1, 2042 1,755,000 October 1, 2038 1,440,000 April 1, 2043 1,795,000 April 1, 2039 1,475,000 October 1, 2043 1,840,000 October 1, 2039 1,510,000 April 1, 2044 1,890,000 April 1, 2040 1,550,000 October 1, 2044 6,115,000* * Final Maturity.
The principal amount of Bonds to be redeemed in any year shall be reduced, upon Written Request of the Corporation, by an amount equal to the principal amount of the Bonds of the same maturity as those subject to mandatory redemption (a) surrendered uncancelled and in transferable form by the Corporation to the Trustee not less than 30 days prior to such redemption date, (b) redeemed (not less than 30 days prior to such redemption date) in or prior to such year pursuant to the optional or extraordinary redemption provisions of the Indenture or (c) purchased by the Trustee out of moneys in the Bond Fund in accordance with the Indenture, if in each case such Bonds shall not have previously served as the basis for any such reduction.
Partial Redemption. No redemption of less than all of the Bonds of a series at the time outstanding shall be made unless the aggregate principal amount of Bonds to be redeemed is equal to at least $5,000 or any integral multiple of $5,000.
Except as otherwise provided under the heading “THE SERIES 2012 BONDS—Redemption—
Extraordinary Redemption,” in the event of a redemption of less than all of the Bonds or less than all of the
Bonds of any series or maturity, the selection of Bonds to be redeemed shall, except as otherwise specified above, be made from the Series and in the order of maturity designated by the Corporation, and within any maturity by lot, as selected by the Trustee. The method of selecting Bonds for redemption by lot shall be determined by the Trustee.
In lieu of redeeming Bonds, the Trustee may, at the Written Request of the Corporation, use such funds otherwise available under the Indenture for redemption of Bonds of such series to purchase Bonds of such series in the open market at a price not exceeding the redemption price then applicable under the Indenture, such Bonds to be delivered to the Trustee for the purpose of cancellation.
Notice of Redemption; Cessation of Interest. The Trustee shall cause notice of any redemption of Bonds of any series under the Indenture to be mailed by first class mail, postage prepaid, except as otherwise provided in the Indenture, to the holders of all Bonds of the series to be redeemed at the registered addresses appearing in the registration books kept for such purpose. Each such notice shall (i) be mailed at least 30 days and not more than 60 days prior to the date fixed for redemption, (ii) identify the Bonds to be redeemed (specifying the CUSIP numbers, if any, assigned to the Bonds), (iii) specify the redemption date and the redemption price, (iv) in the case of the optional and extraordinary redemption of Bonds other than those that are to be redeemed from proceeds of a refunding bond issue, that sufficient funds have been deposited with the Trustee to pay the applicable redemption price of the Bonds to be redeemed (subject to the following paragraph), and (v) state that on the redemption date the Bonds called for redemption will be payable at the Principal Office of the Trustee, that from that date interest will cease to accrue, and that no representation is made as to the accuracy or correctness of the CUSIP numbers printed therein or on the Bonds. No defect affecting any Bond, whether in the notice of redemption or mailing thereof (including any failure to mail such notice), shall affect the validity of the redemption proceedings for any other Bonds.
Anything in the Indenture notwithstanding, if at the time of mailing of any notice of optional or extraordinary redemption of Series 2012 Bonds, moneys shall not have been deposited with the Trustee sufficient to redeem all of the Series 2012 Bonds called for redemption, such notice shall state that it is conditional in that it is subject to the deposit of the redemption moneys with the Trustee on the redemption date and shall be of no effect unless such moneys are so deposited.
In addition to the foregoing notice, further notice shall be given by the Trustee (either as a separate notice or as part of the notice above) as set out below. No defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed:
(i) Each further notice of redemption given under the Indenture shall contain the information required above for an official notice of redemption plus (A) the date of issue of the Bonds as originally issued, (B) the rate of interest borne by each Bond being redeemed; (C) the maturity date of each Bond being redeemed; and (D) any other descriptive information needed to identify accurately the Bonds being redeemed.
(ii) Each further notice of redemption shall be sent at least 30 days before the redemption date by first class mail, postage prepaid, to all registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds and shall be provided at least 30 days before the redemption date to the Municipal Securities Rulemaking Board (“MSRB”) pursuant to its Electronic Municipal Marketplace Access System (“EMMA”) (or any successor electronic filing system established by the MSRB).
Failure to give notice in the manner prescribed under the Indenture with respect to any Bond, or any defect in such notice, shall not affect the validity of the proceedings for redemption for any Bond with respect to which notice was properly given. Upon the happening of the above conditions and if sufficient moneys are on deposit with the Trustee on the applicable redemption date to redeem the Bonds to be redeemed and to pay interest due thereon, the Bonds thus called shall not after the applicable redemption date bear interest, be protected by the Indenture or be deemed to be outstanding under the provisions of the Indenture.
Delivery of Certificates; Registered Owners
The Trustee shall keep the registration books for the Series 2012 Bonds (the “Bond Register”) at its Principal Office. Bond certificates in fully registered form will be delivered to, and registered in the names of, the registered owners in authorized denominations. The ownership of the Series 2012 Bonds so delivered (and any Series 2012 Bonds thereafter delivered upon transfer or exchange described below) shall be registered in the Bond Register, and the Issuer and the Trustee shall be entitled to treat the registered owners of such Series 2012 Bonds, as their names appear in such Bond Register as of the appropriate dates, as the owners thereof for all purposes described herein and in the Indenture.
SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2012 BONDS
Limited Obligations of the Issuer
THE SERIES 2012 BONDS, TOGETHER WITH INTEREST THEREON, SHALL BE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE, ON A PARITY WITH ALL OTHER BONDS OUTSTANDING UNDER THE INDENTURE, INCLUDING THE SERIES 2011 BONDS, SOLELY FROM THE TRUST ESTATE AND SHALL BE A VALID CLAIM OF THE HOLDERS THEREOF ONLY AGAINST THE TRUST ESTATE, WHICH IS BEING ASSIGNED AND PLEDGED UNDER THE INDENTURE FOR THE EQUAL AND RATABLE PAYMENT OF THE BONDS AND SHALL BE USED FOR NO OTHER PURPOSE THAN TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS, EXCEPT AS MAY BE OTHERWISE EXPRESSLY AUTHORIZED IN THE INDENTURE.
THE SERIES 2012 BONDS AND THE INTEREST PAYABLE THEREON ARE LIMITED OBLIGATIONS OF THE ISSUER AND THE BONDS DO NOT CONSTITUTE A GENERAL DEBT OR LIABILITY OF THE ISSUER NOR A DEBT OR LIABILITY OF THE COMMONWEALTH OR OF ANY POLITICAL SUBDIVISION THEREOF (INCLUDING WITHOUT LIMITATION THE UNIVERSITY AND THE STATE SYSTEM OF WHICH THE UNIVERSITY IS A PART) OTHER THAN THE ISSUER (BUT ONLY TO THE EXTENT OF THE TRUST ESTATE) OR A PLEDGE OF THE FAITH AND CREDIT OF THE ISSUER OR OF THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION THEREOF (INCLUDING WITHOUT LIMITATION THE UNIVERSITY AND THE STATE SYSTEM), BUT SHALL BE PAYABLE SOLELY FROM THE TRUST ESTATE IN ACCORDANCE WITH THE INDENTURE. THE ISSUANCE OF THE SERIES 2012 BONDS UNDER THE PROVISIONS OF THE ACT DOES NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY OBLIGATE THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION THEREOF (INCLUDING WITHOUT LIMITATION THE UNIVERSITY AND THE STATE SYSTEM) TO LEVY ANY FORM OF TAXATION FOR THE PAYMENT THEREOF OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT AND SUCH BONDS AND THE INTEREST PAYABLE THEREON DO NOT NOW AND SHALL NEVER CONSTITUTE A DEBT OF THE COMMONWEALTH WITHIN THE MEANING OF THE CONSTITUTION OR THE STATUTES OF THE COMMONWEALTH AND DO NOT NOW AND SHALL NEVER CONSTITUTE A CHARGE AGAINST
THE CREDIT OR TAXING POWER OF THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION THEREOF (INCLUDING WITHOUT LIMITATION THE UNIVERSITY AND THE STATE SYSTEM). THE ISSUER HAS NO TAXING POWER. THE COMMONWEALTH SHALL NOT IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2012 BONDS OR FOR THE PERFORMANCE OF ANY PLEDGE, MORTGAGE, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER WHICH MAY BE UNDERTAKEN BY THE ISSUER. NO BREACH BY THE ISSUER OF ANY SUCH PLEDGE, MORTGAGE, OBLIGATION OR AGREEMENT MAY IMPOSE ANY LIABILITY, PECUNIARY OR OTHERWISE, UPON THE COMMONWEALTH OR ANY CHARGE UPON ITS GENERAL CREDIT OR AGAINST ITS TAXING POWER.
NEITHER THE UNIVERSITY NOR THE STATE SYSTEM SHALL HAVE ANY RESPONSIBILITY OR LIABILITY, EXPRESS OR IMPLIED, WITH RESPECT TO THE INDENTURE, THE LOAN AGREEMENT, ANY OTHER BOND DOCUMENT, THE SERIES 2012 BONDS, OR ANY OTHER BONDS OR THE 2012 PROJECT OR ANY OTHER PROJECT.
Mortgage and Assignment of Contract Documents
As security for its obligations under the Series 2012 Bonds, the Loan Agreement and the Indenture, the Corporation will execute and deliver to the Trustee for the benefit of the Bondholders the Mortgage pursuant to which the Corporation will grant to the Trustee (1) a first priority mortgage lien on the Real Estate, and (2) a first priority security interest in the Revenues and the Personalty relating to the Project Facilities. The Corporation and the Developer will also execute and deliver to the Trustee, as further security for the Corporation’s obligations under the Loan Agreement and the related Bond Documents, the Assignment of Contract Documents. Pursuant to the Assignment of Contract Documents, each of the Corporation and the Developer will grant to the Trustee a security interest in their respective rights under and interests in the Management Agreement, the Cooperation Agreement, the 2012 Development Agreement (as to the Corporation only), the 2012 Construction Contract, the 2012 Architect Agreement and the other contracts and agreements entered into by the Corporation and/or the Developer with respect to the 2012 Project Facilities.
Pledge and Assignment of Trust Estate
Pursuant to the Indenture, the Issuer will assign and grant to the Trustee a security interest in the following property:
(i) All right, title and interest of the Issuer in and to the Loan Payments (as defined herein) and the Loan Agreement (excluding Unassigned Rights);
(ii) All funds and accounts established, held (by or in the name of) or controlled by the Trustee pursuant to the terms of the Indenture, including without limitation the Depository Account (as described herein), but excluding amounts held by the Trustee in the Rebate Fund and other moneys expressly excluded thereunder;
(iii) All income and receipts on the funds (other than the Rebate Fund) held by the Trustee under the Indenture; and
(iv) Any and all other property of every kind and nature from time to time hereafter, by delivery or by writing of any kind, conveyed, pledged, assigned or transferred as and for additional security under the Indenture by the Issuer or the Corporation, or by anyone on their behalf, to the Trustee, including without limitation funds of the Corporation held by the Trustee in any of the funds established under the Indenture as security for the Series 2012 Bonds.
Such property, together with the rights granted to the Trustee under the Mortgage and the Assignment of Contract Documents, constitute the Trust Estate, which secures the payment of the principal of, premium, if
any, and interest on the Series 2012 Bonds according to their tenor and effect and secures the performance and observance by the Issuer of the covenants expressed in the Indenture and in the Series 2012 Bonds. The lien and security interest granted and created by the Indenture is, upon the occurrence of an Event of Default, subject to a prior lien to secure the payment of all fees and expenses of the Trustee.
Because of certain risks associated with pledging and granting a security interest in certain of the collateral of the nature described above, potential investors should not rely solely upon such collateral as providing security for the Series 2012 Bonds. See “CERTAIN BONDHOLDERS’ RISKS—Pledge, Assignment and Grant of Security Interest in Future Revenues” herein.
Revenue Fund
Under the Indenture, a Revenue Fund has been established by the Trustee, into which the Corporation has agreed to deposit or cause to be deposited, the Revenues. As provided in the Loan Agreement, the Corporation will deposit, or will cause the Manager to deposit, all Revenues weekly into a special depository account (the “Depository Account”) in the name of the Trustee and held by a bank or financial institution acceptable to the Trustee. Amounts held in the Depository Account will be deemed held by the Trustee under the Indenture and will be part of the Trust Estate. The Trustee will cause all amounts deposited in the Depository Account to be transferred to the Revenue Fund at least once per week during each calendar month. The amounts deposited in the Revenue Fund shall be disbursed by the Trustee on the twenty-fifth day of each month (or the next succeeding Business Day if the twenty-fifth day of a month is not a Business Day), except for disbursements required pursuant to clause (c) below, which shall be disbursed on March 25 and September 25 of each calendar year, as follows (provided, that, if in any month the Trustee is unable to make a transfer required as described below, the Trustee shall make such transfer in the next succeeding month when the Trustee has funds available therefor in the relevant payment priority):
(a) there shall be transferred to the University the System Fee and Base Rent then due and payable;
(b) there shall be paid to the Issuer any Issuer Fee then due and payable, to the Trustee any Trustee Fee then due and payable, and to each Rating Agency any rating agency fee then due and payable;
(c) there shall be transferred to the Bond Fund, on March 25 and September 25 of each calendar year, the amount the Corporation is obligated to deposit therein as the Loan Payments pursuant to the Loan Agreement after all amounts in the Capitalized Interest Account established within the Bond Fund for a series of Bonds and required to be applied to such Loan Payments pursuant to the Indenture, if any, have been expended and taking into account amounts transferred to the Bond Fund from the Debt Service Reserve Fund pursuant to the Indenture;
(d) there shall be transferred to the Operational Expense Fund the amount budgeted in the Annual Budget for Operating Expenses of the Project Facilities for the next succeeding month, but excluding the payments described in clauses (a), (b) and (c), above, and excluding Percentage Rent under the Ground Lease; and
(e) there shall be transferred to the Debt Service Reserve Fund any amount required to be deposited therein pursuant to the Indenture or the Loan Agreement.
On June 25 of each year (or the next succeeding Business Day if such June 25 is not a Business Day), immediately after the transfers pursuant to clauses (a) through (e) have been made, any remaining amounts shall be transferred to the Surplus Fund and distributed in accordance with the Indenture, as described below under the subheading “Surplus Fund”.
The Corporation will provide the Trustee with a written instruction as to the amount to be paid pursuant to clauses (a) and (d) above and amounts to be paid from the Surplus Fund pursuant to the Indenture
as soon as practicable prior to the date on which such payment is to be made, which instruction shall include invoices or other documentation or otherwise shall show in reasonable detail the calculation of the amount to be paid.
Surplus Fund
Under the Indenture, a Surplus Fund has been established by the Trustee into which moneys remaining in the Revenue Fund after the transfers, deposits and payments described in paragraphs (a) through (e) under the subheading “Revenue Fund” above shall be deposited. On the twenty-fifth day of each month, amounts on deposit in the Surplus Fund shall be applied by the Trustee to cure any deficiency in the Operational Expense Fund, the Bond Fund or the Debt Service Reserve Fund in the order of priority described under paragraphs (a) through (e) under the subheading “Revenue Fund” above. On June 25 of each year, after making the transfers described in the preceding sentence, amounts in the Surplus Fund shall be applied first to make any required payments into the Repair and Replacement Fund pursuant to the Indenture, and, second, to make any required payments into the Operational Reserve Fund pursuant to the Indenture,all such transfers and amounts to be set forth in a written direction executed by an Authorized Officer of the Corporation to the Trustee.
Following the receipt by the Trustee of annual Audited Financial Statements of the Project Facilities for each Fiscal Year delivered by the Corporation pursuant to the Loan Agreement, the amounts on deposit in the Surplus Fund shall be transferred, subject to a contrary direction signed by the University and the Corporation,
(a) to the University to pay Percentage Rent (as defined in the Ground Lease) due and owing to the University, and
(b) following the payments described in clause (a), to the Corporation;
provided that, beginning with the Fiscal Year ending June 30, 2013, any such transfer to the University or the Corporation shall be made only upon receipt by the Trustee of an Officer's Certificate executed by an Authorized Officer of the Corporation certifying that
(1) no Event of Default has occurred and is continuing under the Indenture,
(2) no draw was made on the Debt Service Reserve Fund during the preceding Fiscal Year, and
(3) (A) the Debt Service Coverage Ratio for the most recently ended Fiscal Year (for which the Audited Financial Statements were received) was at least 1.20, (B) the Annual Budget for the then current Fiscal Year has established rates, fees and charges such that the Debt Service Coverage Ratio for such current Fiscal Year is projected to be at least 1.20, and (C) the Revenues allocable to such Project Facilities for the preceding Fiscal Year for Project Facilities which were occupied by students during such Fiscal Year were at least equal to the sum of Operating Expenses, Debt Service Requirements on Long-Term Debt and required deposits to the Debt Service Reserve Fund, the Operational Reserve Fund and the Repair and Replacement Fund.
The tests set forth above are referred to herein as the “Release Test.” The Officer’s Certificate required above shall include written instruction from the Corporation as to the amount to be paid to the University as Percentage Rent under the Ground Lease, together with invoices or other documentation showing in reasonable detail the calculation of Percentage Rent due and owing.
In the event that the Release Test is not met by the Corporation for a given Fiscal Year (“Year 1”), but the Corporation satisfies the Release Test in the subsequent Fiscal Year (“Year 2”), the amount that would have been distributed in respect of such prior Fiscal Year had the Release Test been met (the “Distributable Amount”) shall be distributed to the Corporation in the subsequent Fiscal Year.
