Sunday, September 5, 2010

Ghost Town in the Sky $16,750,000 Federal Loan Package

Federal Funding for Ghost Town in the Sky Redevelopment

According to FedSpending. Org, Ghost Town Partners LLC, received $16,750,000 in direct and guaranteed loans from the Department of Agriculture’s Rural Business and Industry (B&I) Guaranteed Loans Program for the period 2006-2007.

These warranties persuaded Branch Banking & Trust to extend Ghost Town Partners, LLC loans in the amount of $9.5 million to acquire and improve the long-shuttered Ghost Town in the Sky Amusement Park business site.

In March 2009, Ghost Town Partners, LLC, filed for Chapter 11 bankruptcy protection to prevent creditors, namely BB&T from gaining control over the company’s assets. The Smoky Mountain News reported on August 24, 2010 that the debtor's reorganization effort is foundering. The promise of a $7 million payment to BB&T, on the part of Allen Harper one of the original Ghost Town investors, has not been fulfilled.

BB&T has indicated that it wants a court-ordered liquidation. Should this action occur, the company’s assets will be sold. If the monies received are less than the federally-backed loan amount, BB&T will collect an undisclosed sum from the USDA-sponsored Rural B&I Guaranteed Loan Program. The Smoky Mountain News queried the respective parties for information re the amount of the loan under federal guarantee but neither the guarantor nor the creditor would answer this question.

USDA Rural Business and Industry Guaranteed Loan Program

The USDA Rural Business and Industry Guaranteed Loan Web site provides the following information:
The purpose of the B&I Guaranteed Loan Program is to improve, develop, or finance business, industry, and employment and improve the economic and environmental climate in rural communities. This purpose is achieved by bolstering the existing private credit structure through the guarantee of quality loans which will provide lasting community benefits. It is not intended that the guarantee authority will be used for marginal or substandard loans or for relief of lenders having such loans.

What is the percentage of Guarantee?

The percentage of guarantee, up to the maximum allowed, is a matter of negotiation between the lender and the Agency. The maximum percentage of guarantee is 80 percent for loans of $5 million or less, 70 percent for loans between $5 and $10 million, and 60 percent for loans exceeding $10 million.

What are the Loan Amounts?

The total amount of Agency loans to one borrower must not exceed $10 million. The Administrator may, at the Administrator discretion, grant an exception to the $10 million limit for loans of $25 million under certain circumstances. The Secretary may approve guaranteed loans in excess of $25 million, up to $40 million, for rural cooperative organizations that process value-added agricultural commodities.
Ghost Town Partners, LLC Loan Exceptions

The Ghost Town Partners LLC, $16,750,000, loan package was exceptional in several respects. It exceeded the $10,000,000 Agency loan threshold and the project site is landslide hazardous.

Geologic hazards were not well-known development impediments in the 60s when the top of Buck Mountain was reconfigured to accommodate the amusement park, but they have been since 1998.

If the decision-makers had reviewed easily-accessible Haywood County landslide and soil survey risk data, they would have declined to underwrite this commercial/residential venture.

Haywood County, North Carolina Landslide Map

Unpublished 2005 Haywood County Stability Index Hazard Map.
Risk models show that 49% of Haywood County land is unstable.

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