Another Arizona conduit authority borrower files for bankruptcy

Harvest Gold Silica Inc. filed a Chapter 11 bankruptcy in federal court this week, after defaulting on bonds it sold through the Arizona Industrial Development Authority (AZIDA) in 2019. 

The case, pending in U.S. Bankruptcy Court for the Northern District of Texas, follows two other bankruptcy filings over the past year by entities that sold bonds through the Arizona conduit debt issuer.  

In its filing, Harvest Gold listed company assets of $1 million to $10 million and liabilities of $10 million to $50 million. 

AZIDA issued $22 million of unrated revenue bonds for Harvest Gold with $5.12 million of taxable debt maturing in 2021 through 2023, carrying yields of 10% to 14%, and $16.92 million of tax-exempt term bonds due in 2030 priced to yield 7.375%. The debt was issued to finance the purchase and upgrade of a processing plant in Congress, Arizona, that transforms gold mining waste into organic fertilizer.

Bond trustee UMB Bank declared events of default in 2021 due to a lack of financial reporting, the company’s insolvency, and a failure to make debt service payments. Harvest Gold has not posted an annual financial report on the Municipal Securities Rulemaking Board’s EMMA website since 2021.

Bondholder representative Greenwich Investment Management Inc filed a lawsuit in Arizona federal court against Harvest Gold and other parties involved in the bond offering in October 2021. The case was voluntarily dismissed by the plaintiff in January 2022. 

Legacy Cares, a nonprofit that sold $284 million of bonds through AZIDA in 2020 and 2021 for a participant sports venue in Mesa, Arizona, filed its Chapter 11 case in Arizona federal court in May. A court-approved sale of the 320-acre Legacy Park allocated only $2.4 million of proceeds to bondholders, who will also receive a 11% stake in the purchaser.

Earlier this year, Restoration Forest Products Group filed for bankruptcy in federal court in Delaware. The company sold $112.8 million of taxable Series A senior and $86.8 million of taxable Series B subordinate sustainability-linked revenue bonds through the authority in 2022 under its former name NewLife Forest Restoration.

In the wake of Legacy Cares and other troubled bond issuances by the AZIDA, Arizona Gov. Katie Hobbs last year directed it to disclose details about borrowers, including past projects and experience, existing financings, past defaults, debt-to-income ratio over the past 12 months, and business plans.

Dirk Swift, AZIDA’s executive director, has said a policy adopted last year by the agency and the application form for conduit bonds reflect the governor’s directives.

Swift did not respond to a request for comment about the Harvest Gold bankruptcy.