Fort Deposit approves debt settlement terms
Published 11:00 am Thursday, November 3, 2011
By Fred Guarino
The Lowndes Signal
In a special called meeting held Tuesday night, the Fort Deposit Town Council approved settlement terms regarding its $1.7 million loan with First Citizens Bank in connection with the town’s industrial park.
The council approved the $630,000 total settlement on a 4-0 vote in the absence of Council members Jacquline Boone and Elbert Lee Means.
Present for the special meeting and voting in favor were Mayor Fletcher Fountain, Darrell Heartsill, Chad Gravely and Irish Simmons.
However, Fountain said, both Means and Boone, who could not attend the meeting, expressed their support for the settlement.
The settlement, subject to the approval of the bank’s legal counsel and the First Citizens Bank board of directors, was offered to the town following a meeting between Fountain and First Citizens Bank President and CEO William Petrey and Ryan Bagents, senior credit officer, according to Fountain and a copy of a letter to Fountain from Bagents dated Oct. 14.
The terms of the settlement, according to Fountain and the letter, include an $8,000 payment at a loan closing on or before Nov. 17, a $22,000 payment on or before the annual due date of Feb. 28, 2012, and 19 annual payments of $30,000 each beginning Feb. 28, 2013 for a total of $600,000 over a period of 20 years.
The loan will accrue interest at a rate of Wall Street Journal Prime “floating with no ceiling and no floor (currently 3.25 percent).”
There will be no pre-payment penalty. But in case of default (paying 30 days late), “the loan will revert back to the original terms and original balance ($1.7 million) of the loan less all payments received up to the time of default.”
Fountain said he had been before the Cooperative District of the town, which had accepted the plan, and that he was bringing it before the town council.
“Now with this approval of the council, then I can sign this agreement with them [First Citizens Bank], and then we’re on our way for a clearing of this bill,” said Fountain.
Gravely made the motion to approve the settlement with a second from Simmons and all voting in favor on a roll call vote.
By way of background, Fountain said the town of Fort Deposit got a grant to improve the industrial park with sewer and water. But he said the grant had a “shortfall.” He said to cover the shortfall, the town borrowed money from First Lowndes Bank.
“We also borrowed money from First Lowndes Bank to erect a building for Sejong, which has nothing to do with this debt here particularly,” he said. “But we were expecting to get some money from the federal government to help take care of this debt, which never came through and then that just put us in a hole.”
Fountain said the town was also expecting to land other plants in the industrial park, which also did not come through.
“Then the economy went bad. And when the economy went bad, we just started going down hill. We couldn’t pay the debt,” Fountain said. “That’s why we got it to $1.7 million.”
Fountain said the town paid over $200,000 on the debt, but it was on the interest, which is where the town is now.
He explained First Citizens Bank acquired First Lowndes Bank along with the debt and is allowing the town to pay $600,000 to clear the debt at $30,000 a year.
When asked where the funds will come from to pay the debt, Fountain said, “Well, we’ve streamlined our budget so we can have money coming from ad valorem taxes and from our sales taxes.”
Fountain said the word went out that the town was going to be foreclosed upon regarding its debt to First Citizens Bank, but Petrey stated the town was not in foreclosure.
Fountain said the town paid by $60,000 to $70,000 on the interest this year.
He said once this debt is paid, it will give the town clear title to its properties in the industrial park, about 135-140 acres. The industrial park is located on Alabama 185 – Old Fort Road – and is home to one industry, Sejong.
Fountain said the Sejong plant is clear of everything with regard to the debt.
Following Tuesday night’s council action, bank officials had no comment.