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Xenia board votes to pay debtors

Restructuring plan may be revealed next week

November 30, 2010
By LINDSEY MUTCHLER Messenger staff writer

BOUTON - The Xenia Rural Water District will be able to make debt payments of $2.9 million to two parity lenders by the Dec. 1 deadline.

The board voted to make the payments to the USDA Rural Development and Series 2006 bonds backed by Assured Guaranty via conference call Nov. 24. The district paid the two lenders $1,066,599 and $1,847,607 respectively.

The debt-beleagured water district has been working to climb its way out from under $140 million in debt since 2009. In an effort to get back in the black, the board voted in June to set aside extra revenue - after paying operating expenses - into a sinking fund to satisfy its debt obligations.

Cory Iben, communications director for Xenia, said the district was able to accrue $2.9 million in the sinking fund by the end of November.

After the payments, the sinking fund balance is zero, Iben said.

Xenia provides water service to customers in 11 north central and central Iowa counties including Webster. It approved a 22 percent increase for all user rates, which was implemented in April and May.

In addition to the increased rates, the board proposed a sale to Des Moines Water Works and debt forgiveness from USDA and Assured Guaranty in order to become solvent again. Both lenders rejected the district's proposal.

USDA's state Director Bill Menner sent Xenia a letter requesting a new solvency proposal that cuts operating expenses and rate restructuring for all users by Thanksgiving. The letter was dated shortly after Bank of America sued the district for repayment of a $7.8 million loan relating to the district's purchase of a water and wastewater treatment facility in Worth County.

Xenia didn't have a proposal ready by the Thanksgiving deadline, but Iben said he expects the board to discuss a new proposal at a special meeting tentatively scheduled for Dec. 9 in Bouton.

The district has also been working to recoup some money by selling extra equipment and inventory, as well as a waste water treatment plant in Worth County.

Xenia's ability to make a full and timely debt payment to Assured may relieve the lender as it continues to fight a lawsuit against CIFG Assurance North.

According to New York online court records, the two bond insurers have been battling it out since July when CIFG sued Assured over Assured's alleged refusal to cover a portion of Xenia's debt payment the district couldn't make in May. Assured has argued it didn't agree to insure Xenia's debt when it signed a contract with CIFG in 2009 to insure CIFG's entire portfolio, which included Xenia.

The contract allowed Assured to exclude any bonds that were rated, as of Oct. 31, 2008, "below investment grade according to CIFG's internal rating scale. Allegedly, Xenia bonds were rated investment grade as of that day by both CIFG and Standard & Poor's.

The case is still active in New York. CIFG attorneys made a summary judgment motion which requested the court issue a ruling in favor of their client. They argue Assured has no genuine issue to be tried. CIFG counsel has also requested a stay for discovery - which was filed by Assured - until the judge rules on its motion.

Contact Lindsey Mutchler at (515) 573-2141 or lindsey@messengernews.net

 
 

 

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