ARIZONA CHRISTIAN UNIVERSITY 2023 - SUMMARY LETTER.PDF
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250 West Street | Suite 700 | Columbus, OH 43215 September 27, 2023 To: Board of Supervisors Board of Directors Maricopa County, Arizona The Industrial Development Authority of the County of Maricopa Re: Not to Exceed $27,000,000 – The Industrial Development Authority of the County of Maricopa Educational Facilities Revenue Bonds (Arizona Christian University Project), Series 2023 Ladies and Gentlemen: At the Authority Board meeting on October 10, 2023, the Authority Board will be asked to grant final approval to the financing for the Arizona Christian University 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, Arizona Christian University (“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 operates Arizona Christian University, which was founded in 1960 in Phoenix, Arizona. Over the past 60 years, the Borrower transitioned from a small, denominational bible college to a rapidly growing, nondenominational Christian university recognized for academic excellence and for preparing graduates for careers of influence. The Borrower has seen rapid growth in the past decade, tripling in size from fewer than 400 students in 2009 to more than 1,200 in 2023. The Chronicle of Higher Education recently recognized the Borrower as the 9th-fastest growing of 318 baccalaureate colleges in America between 2011 and 2021. The Borrower outgrew its original Phoenix site and acquired and moved to a 68-acre campus located at 1 W Firestorm Way, Glendale, AZ 85306 (the “Facilities”) in 2019. The Borrower acquired the Facilities with proceeds of bonds from the Arizona Industrial Development Authority in the original aggregate principal amount of $24,960,000 (the “Series 2019 Bonds”). The Series 2019 Bonds are secured by a deed of trust on the Facilities and two obligations (the “Series 2019 Obligations”) issued by the Borrower under a Master Trust Indenture Board of Supervisors Board of Directors September 27, 2023 Page 2 4870-2975-7311.2 between the Borrower and U.S. Bank Trust Company, National Association (as amended and supplemented, the “Master Indenture”). The Facilities improved with proceeds of the Series 2019 Bonds feature more than three times the acreage, parking, dining hall space, dormitory rooms, classroom space and building square footage than the prior Phoenix site and includes a 134-room hotel and conference center. Since relocating to the Facilities, the Borrower has made substantial improvements, including construction of science laboratories for the biology and pre-med programs, installation of turf soccer, football, and softball fields, conversion of a classroom into a performing arts auditorium, and acquisition of a former YMCA adjacent to campus that is now the Firestorm Recreation Center, bringing the Borrower’s total footprint to approximately 75 acres. The requested financing will help the Borrower continue to improve the campus facilities and academic programming to support future enrollment growth. In addition, the financing will allow the Borrower to refinance a portion of outstanding taxable debt used to finance initial capital improvements to and operations at the Facilities, under better financing and repayment terms. THE PROJECT The Authority will loan the proceeds of the Bonds to the Borrower, to (a) finance, refinance or reimburse the Borrower to pay all or a portion of the costs of acquiring, constructing, renovating, improving, maintaining and equipping, as applicable, in connection with the Facilities, (b) prepay all or a portion of certain outstanding loans of the Borrower, (c) establish a debt service reserve fund, (d) establish a repair and replacement fund, (e) fund certain program expenses, including online programs and enrollment and retention programs, (f) pay capitalized interest on the Bonds, if any, (g) fund working capital expenses, if any, and (h) pay certain cost of issuance relating to the sale of the Bonds. The Facilities are owned and operated by the Borrower. 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: Board of Supervisors Board of Directors September 27, 2023 Page 3 4870-2975-7311.2 Issuer: The Industrial Development Authority of the County of Maricopa Issuer Counsel: Ice Miller LLP Applicant/Borrower: Arizona Christian University Underwriter: B.C. Ziegler and Company Underwriter’s Counsel: Clark Hill PLC Bond Counsel: The Stratton Law Firm, PLLC Applicant/Borrower Counsel: The Stratton Law Firm, PLLC Trustee: U.S. Bank Trust Company, National Association Trustee’s Counsel: Tucker Ellis LLP PRINCIPAL FINANCING DOCUMENTS Document Parties Series 2023 Bond Trust Indenture (the “Bond Indenture”) Issuer and Trustee Series 2023 Loan Agreement (the “Loan Agreement”) Issuer and Borrower Deed of Trust Borrower Bond Purchase Agreement Borrower, Issuer and Underwriter Preliminary Official Statement 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 $27,000,000. 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 Borrower will enter into the 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 Borrower will also enter into a Fifth Supplemental Master Indenture of Trust and issue one or more Obligations to further secure the Bonds and amounts due under the Loan Agreement. Such Obligations will be secured on parity with the Series 2019 Obligations (and any additional obligations under the Master Indenture). 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 and the Master Indenture Board of Supervisors Board of Directors September 27, 2023 Page 4 4870-2975-7311.2 will be secured by the Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing (or modification thereto, “Deed of Trust”) that will encumber the Facilities. Such Deed of Trust will secure amounts due under the Master Indenture with respect to both the Series 2019 Bonds and the Bonds on parity. The Bonds will be offered for sale by the Underwriter pursuant to the Preliminary Official Statement only to (1) “Qualified Institutional Buyers” (as defined in Rule 144A promulgated under the Securities Act) and (2) “Accredited Investors” (as defined in Rule 501(a) of the Securities Act). FINAL APPROVAL At the Authority Board meeting on October 10, 2023, 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 October 18, 2023 or thereafter, 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 November 2023. 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. Board of Supervisors Board of Directors September 27, 2023 Page 5 4870-2975-7311.2 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 with respect to the provisions related to the Authority, 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.