Tuesday, September 9, 2014

Another Problem for Puerto Rico's Municipal Bondholders and PR Taxpayers

WSJ
Trump-Branded Golf Course in Puerto Rico Continues to Struggle
Sept 8, 2014
by Katy Stech

Donald Trump
A golf course in Puerto Rico that uses celebrity developer Donald Trump's name has defaulted on its borrowing agreement with municipal bondholders who extended more than $20 million to build the 36-hole luxury course.

In an Aug. 29 letter filed to public bond disclosures, the owner of The Trump International Golf Club Puerto Rico blamed its failure to pay $119,814.17 in August on "financial difficulties." The borrowing deal is in default, said Jorge L. Diaz, executive vice president of the course's owner that extended the bonds. The letter wasn't posted to the Municipal Securities Rulemaking Board's disclosures website until Sept. 4.

Mr. Diaz didn't respond to interview requests to explain the course's financial challenges or say whether the course would file for bankruptcy. He is the son of Arturo Diaz Jr., a prominent developer who owned the course with his wife during the golf course's 2011 refinancing deal and who died in October 2012. Mr. Arturo Diaz's asphalt business paved major roadways in Puerto Rico, along with parking lots at stadiums and airport runways, according to news reports.

The golf course opened in March 2004 as Coco Beach Golf & Country Club but renamed itself in 2008 after making a licensing deal to use the Trump name. The facility has two 18-hole courses that were designed by professional golfer Tom Kite and a 46,000-square foot clubhouse.

The golf course was built with municipal bonds that were refinanced in a $25.6 million deal in March 2011. The bonds, which have tax perks for investors who bought them, flowed through the island's tourism fund, created in 1993 to back projects that would draw visitors to the 3.6 million-resident island.

The course is located next to the 486-room Gran Meliá Hotel, but by the time of the refinancing, local players made up about 85% of its customers.

The golf course's owner has long struggled to keep up with its bond payment promises. Since early 2012, the tourism agency has paid at least $3.2 million of the golf course's bond debt, according to public filings. In July, Standard & Poor's lowered the rating on golf course's bonds to BB- from BB.

At the time of the 2011 refinancing, the cours
e employed 82 people.