Owners of defaulted Arizona sports venue debt may have additional claims

BY SourceMedia | MUNICIPAL | 09/22/23 02:03 PM EDT By Karen Pierog

Bondholders may have actionable claims related to the sale of now-defaulted debt that financed an Arizona participant sports venue for Legacy Cares Inc., which filed for bankruptcy in May, according to a disclosure notice.

Law firm Davis & Ceriani "has concluded that there may be actionable claims related to the sale of the bonds that are potential sources of recovery for individual bondholders, which are not available to the trust estate," bond trustee UMB Bank's notice posted Friday on the Municipal Securities Rulemaking Board's EMMA website said.

Attorneys at the law firm, which was retained by the trustee at the direction of a committee of several large institutional bondholders to investigate potential claims, did not immediately respond to a request for comment Friday.

Legacy Cares filed the Chapter 11 bankruptcy in Arizona federal court May 1 after defaulting on $284 million of mostly tax-exempt, unrated revenue bonds it sold in 2020 and 2021 through the Arizona Industrial Development Authority.

The bond trustee's notice also said, "outside parties" have "expressed interest in the possibility of purchasing bonds or claims from individual holders," specifically naming Saybrook Capital, which along with attorneys from Davis & Ceriani, will make presentations to bondholders during a call scheduled for Wednesday.

Efforts to sell the 320-acre Legacy Park in Mesa, which hosts youth and amateur competitions in sports ? including soccer, basketball, volleyball, and pickleball ? are moving forward after U.S. Bankruptcy Court Judge Daniel Collins approved bidding procedures and timelines earlier this month. A Sept. 28 bid deadline was set. In the case of multiple bids, an auction will be held on Oct. 5, and a court hearing to consider approving a sale was scheduled for Oct. 18.

Doug Moss resigned his positions as president and board member of nonprofit Legacy Cares at the end of August, saying his presence was no longer serving the best interests of Legacy Park.

The U.S. trustee monitoring the bankruptcy case filed a motion in June to appoint an independent trustee to assume control over Legacy Cares' assets or dismiss the case, citing "gross mismanagement" and other problems. While Collins rejected the moves, his order said "any party engaged in wrongdoings before or after the petition date will be held to account."

In a statement, Moss acknowledged being "a focal point" in the U.S. trustee's efforts.

"I believe that I have always been transparent in conducting park operations, including during the bankruptcy process and have worked hard to support the charitable mission of Legacy Cares, Inc," the statement said.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.