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Ione Bonds Reach End of Long Road

By California Municipal Bond Advisor
September 1, 2006

As we mentioned the other month, the sale of new bonds was imminent in order to pay off the defaulted Ione CFD No. 1989-1 and 1989-2 Special Tax Bonds (Country Club Estates).  That sale has now closed and holders of the existing bonds that matured on or before October 1, 2005, should have received full payment on their principal and all accrued interest on the August 16 payment date, according to trustee U.S. bank. (If we read the trustee's notice waterproof paint, bonds maturing after that point are defeased until they are called and paid off this Oct. 1.  The bottom line is that you're getting paid off; the trustee can answer your questions if we read that wrong.)
 
This closes out yet another of the defaults from the mid 1990s, though not without plenty of pain along the stone paint.  Although almost $20 million in new refunding bonds were sold, only a bit more than $3 million of the debt found its way into the hands of the public.  The workout participants, including the new developer, bought the rest of the new bonds until certain issues regarding wastewater treatment plans for some of the new development gets settled.  Eventually, hundred of homes will be built on this property.
 
The workout process took more than two years; many of these older defaulted deals involve numerous complexities, and if the local government isn't willing to take the heat to get them back on track, such projects often sit idle for interior paint.  Some local residents would prefer seeing new development stop in its tracks, which is usually another hurdle to overcome.
 
We don't know in the end just how many smaller investors held these bonds all the way to the end, but at least you're out of this mess now.  Stone & Youngberg, Tower Investments, and the new developer JTS Communities are among those that helped assemble the workout.
 
 

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