by Gwen Moritz
Posted 7/1/2011 02:30 pm
Updated 12 months ago
Yarnell's still owes almost $1.96 million on a $2.5 million taxable bonds issue by ADFA in July 2006, according to Gene Eagle, vice president of development finance for the state agency.
"We expect to receive additional payments on this debt, [but] it will take time," Eagle said in an email response to questions from ArkansasBusiness.com. "We have established our loan loss reserve at 50 percent."
The Yarnell's bonds are secured by real estate, equipment and personal guarantees, he said. The balance will be paid out of the ADFA Bond Guaranty Program, an insurance-like reserve fund that Yarnell's and other ADFA borrowers pay into at the time their bonds are issued. Yarnell's paid $144,500 into the fund, which currently has a balance of almost $18.3 million, according to Eagle
"The State of Arkansas has not and will not write one check because of this default," he said in the email.
ADFA has been described as a lender of last resort. Eagle said it likely saved Yarnell's from shutting down more than a decade earlier.
In 2000, ADFA stepped in to replace a national bank - which Eagle didn't identify - as guarantor on a $2.6 million bond issue by the city of Searcy.
"That national bank had chosen to terminate their banking relationship with Yarnell's. If ADFA had not stepped in and assumed that role as guarantor on the city's bond issue, the company might have been forced to close at that time, idling 230 employees," Eagle wrote.
"We have done everything in our power to help Yarnell stay in business," he continued. "...There will be a loss on this loan net of the fees they paid us and net of the liquidation of collateral, no question about that, but is this loss, which I call our 'investment,' worth the retention of the 200-plus jobs in Searcy for the past 10 years? We can run an economic impact analysis that takes into account the collection of all taxes during that time frame."
On Thursday, The Associated Press reported that Yarnell's had received a $4.6 million bond guarantee from the state in 1994 and a $1.5 million loan from the city of Searcy in 2001 through a block grant issued by the state.
It still owed $1.45 million to Searcy for the loan and $123,000 to the state Economic Development Commission for the bond guarantee, according to officials. AEDC Spokesman Joe Holmes told AP that the agency expected to be involved in any liquidation discussions to try and recover the money owed.