NEW LEARNING VENTURES 2022 - REPORT LETTER TO BOS AND BD.PDF
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John Fries T (602) 440-4819 Email:jfries@clarkhill.com Clark Hill 3200 North Central Avenue, Suite 1600 Phoenix, AZ 85012 T (602) 440-4800 F (602) 257-9582 clarkhill.com 267393052.v1 June 7, 2022 To: Board of Supervisors Board of Directors Maricopa County, Arizona The Industrial Development Authority of the County of Maricopa Re: Not to Exceed $6,500,000 – The Industrial Development Authority of the County of Maricopa Education Revenue Bonds (New Learning Ventures, Inc. Project), Series 2022 Ladies and Gentlemen: At the Authority Board meeting on June 14, 2022, the Authority Board will be asked to grant final approval to the financing for the New Learning Ventures, Inc. Project and to adopt a resolution authorizing the issuance and sale of the bonds as described above (the “Bonds”). This letter provides a summary of the proposed financing. THE AUTHORITY The Authority is an Arizona nonprofit corporation, formed with the permission of Maricopa County and incorporated under and pursuant to the Arizona Industrial Development Financing Act, Title 35, Chapter 5, Arizona Revised Statutes, as amended (the “Act”), and the Authority is designated by law to be a political subdivision of the State of Arizona. THE APPLICANT/BORROWER The Applicant/Borrower, New Learning Ventures, Inc. (“Borrower”), is an Arizona nonprofit corporation and a tax-exempt organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. The Borrower currently operates a K-8 elementary charter school known as Phoenix Modern Charter School at 200 East Mitchell Drive, Phoenix, AZ 85012 (the Phoenix Modern Campus”) under a charter school contract issued by the Arizona State Board for Charter Schools pursuant to Title 15, Chapter 1, Article 8, Arizona Revised Statutes, as amended. The Borrower leases the Phoenix Modern Campus from CSDCPC Phoenix Modern, LLC (“Landlord”), an unrelated third party. Board of Supervisors Board of Directors June 7, 2022 Page 2 clarkhill.com 267393052.v1 In addition, the Applicant operates a K-8 non-profit private school known as Acton Academy located at 3330 E. Camelback Road, Phoenix, Arizona 85018. Acton Academy operates a non-charter, tuition-based K-8 school without state funding. THE PROJECT The Borrower will use the proceeds of the Bonds to: (i) purchase the Phoenix Modern Campus from its Landlord under a lease-purchase option; (ii) renovate, improve and equip the Phoenix Modern Campus and Acton Academy; (iii) refinance outstanding debt; (iv) pay capitalized interest on the Bonds; and (v) pay the costs incurred in connection with the authorization, issuance and sale of the Bonds (collectively, the “Project”). The Project is located in Supervisorial District No. 3. NOTIFICATION TO ARIZONA ATTORNEY GENERAL As required by the provisions of Arizona Revised Statutes, Section 35-721.F, the Authority will notify the Arizona Attorney General of the Authority’s intention to issue the Bonds. ALLOCATION FOR TAX EXEMPT FINANCING No allocation of the Arizona “volume cap” is required for the issuance of the Bonds for the benefit of a 501(c)(3) organization. FINANCING PARTICIPANTS The major participants in the financing are as follows: Issuer: The Industrial Development Authority of the County of Maricopa Issuer Counsel: Clark Hill PLC Applicant/Borrower: New Learning Ventures, Inc., an Arizona non-profit corporation Bond Purchaser: Various accounts managed by Ecofin Advisors, LLC Placement Agent: RBC Capital Markets, LLC Bond Counsel: Ballard Spahr, LLP Applicant/Borrower Counsel: Warren Charter Law, LLC Placement Agent Counsel: Polsinelli Board of Supervisors Board of Directors June 7, 2022 Page 3 clarkhill.com 267393052.v1 PRINCIPAL FINANCING DOCUMENTS Document Parties Trust Indenture (the “Bond Indenture”) Issuer and Trustee Loan and Security Agreement (the “Loan Agreement”) Issuer and Borrower Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing Borrower Placement Agent Agreement Issuer and Placement Agent Tax Certificate and Agreement Issuer and Borrower Various assignment of contract instruments Borrower PLAN OF FINANCING The Bonds will be issued in one or more tax exempt and taxable series in an aggregate principal amount of not to exceed $6,500,000. The proceeds from the sale of the Bonds will be loaned by the Authority to the Borrower pursuant to the terms of the Loan Agreement. The Borrower will be obligated to make loan repayments in amounts and at such times as required to pay principal and interest on the Bonds on their respective due dates. The obligations of the Borrower to make periodic loan repayments as well as to perform the other obligations of the Borrower as set forth in the Loan Agreement will be secured by the Deed of Trust that will encumber the property being acquired and financed. The Borrower will enter into a Loan Agreement to evidence the obligations of the Borrower to make loan repayments in amounts necessary to pay the principal and interest on the Bonds. The Bonds will be sold in a private placement to various accounts managed by Ecofin Advisors, LLC, as “accredited investor” within the meaning of Rule 501 of Regulation D or “qualified institutional buyers” within the meaning of Rule 144A, promulgated under the Securities Act. Finally, the Tax Certificate and Agreement will be executed by the Authority and Borrower to evidence various agreements aimed at establishing and preserving the tax-exempt status of the Bonds. Board of Supervisors Board of Directors June 7, 2022 Page 4 clarkhill.com 267393052.v1 FINAL APPROVAL At the Authority Board meeting on June 14, 2022, the Authority Board will be asked by the Applicant/Borrower to grant final approval to the application for financing and to adopt a resolution authorizing the issuance and sale of the Bonds. BOARD OF SUPERVISORS APPROVAL Under the provisions of A.R.S. § 35-721.B., the proceedings under which the Bonds of the Authority are to be issued require the approval of the Maricopa County Board of Supervisors for each issuance of bonds. If the Authority Board acts to grant final approval for the financing and to adopt a resolution authorizing the issuance and sale of the Bonds, the Maricopa County Board of Supervisors will be requested, at its meeting on June 22, 2022, to act as required by law to adopt a resolution approving the proceedings of the Authority for the issuance of the Bonds. Under the provisions of the Act, specifically A.R.S. § 35-742, Maricopa County is not in any event liable for the payment of principal or interest on bonds issued by the Authority or for the performance by the Authority of any pledge, mortgage, obligation or agreement of any kind undertaken by the Authority and bonds of the Authority or any of its agreements or obligations shall not be construed to constitute an indebtedness of Maricopa County within the meaning of any constitution or statutory provision. TRANSACTION CLOSING If the required approvals of the Authority Board and the Maricopa County Board of Supervisors are received, it is currently anticipated that the Bonds will be issued in late June, 2022. At the time the Bonds are issued, it is anticipated the designated Bond Counsel will deliver its written opinion to the effect the Bonds have been validly issued and that as to the portion of the Bonds designated as being tax-exempt, the interest on the Bonds is exempt from federal and Arizona income taxation and that as to the portion of the Bonds that are not designated as tax- exempt, the interest on such Bonds will be exempt from Arizona income taxation. LEGAL COUNSEL RECOMMENDATION As counsel to the Authority, we have reviewed drafts of the principal financing documents, we have been advised that these documents are now in substantially final form, and based upon our review of such and our review of the proceedings to date relating to the proposed issuance of the Bonds, we believe the financing documents and proceedings are in substantial conformance with the policies and guidelines of the Authority and are in both form and substance acceptable for the Authority Board and Maricopa County Board of Supervisors to act upon and that the Resolution presented to the Authority Board relating to authorizing the issuance and sale of the Bonds, and related matters, and the Resolution of the Maricopa County Board of Supervisors will be asked to adopt are in form and substance acceptable for the adoption.