Wenatchee, WAThere is an expectation that disgruntled bondholders tied to an arena development in Washington state will launch a lawsuit alleging securities fraud, amidst other allegations. The Town Toyota Center, located in Wenatchee, went into default December 1 and is projected to lose $400,000 in 2012. Meanwhile, investors holding $42 million in bonds are reportedly not happy.
The Wenatchee World noted in December of last year that some investors were optimistic a payback arrangement could be worked out to the mutual satisfaction of all concerned, allowing them to at least recoup their capital—if not reap a return akin to other stocks and securities.
However, according to the Wenatchee World (12.20.11), not all bondholders are wearing rose-colored glasses. They expect to litigate in order to recover the investment, as well as compensation for losses and lack of returns.
According to various sources, the facility broke ground in September 2006 and opened about two years later. Originally known as the Greater Wenatchee Regional Event Center, the name changed to the Town Toyota Center after an area car dealership purchased naming rights to the facility shortly after it opened.
The $52.8 million multipurpose facility hosts basketball, ice hockey, concerts and other events, with a capacity of 5,800 in the concert configuration. In spite of its current name, the facility is owned by the Wenatchee Public Facilities District (PFD), and it is the owner after whom about one quarter of current bondholders plan to pursue for compensation.
But the owner will likely not be the lone defendant in the proposed securities lawsuit, according to the December report in the Wenatchee World. The PFD will likely be challenged first, although legal observers make the point that the public facilities district has no money and few, if any, assets to speak of.
Thus, there is speculation that proposed securities fraud litigation will cast its net over the nine jurisdictions that make up the district, as well as the bond underwriter, among other defendants.
There is further speculation that the lawsuit will allege breach of contract, securities investment fraud and other violations related to the issuance of bonds used to fund the construction of the facility.
Plaintiffs will likely seek damages that will include their initiation investment, as well as claims for unrealized returns from capital tied up in the failed bonds.
The official website for the Town Toyota Center lists upcoming events. Among them, games for one of its primary tenants, the Wenatchee Wild, a concert by the rock group Styx, a touring Stars on Ice show and an appearance by the Harlem Globetrotters.
It should be noted that the US Securities and Exchange Commission (SEC) is investigating the facility with a view to its financing. The SEC has the power to bring charges against the principles involved in the arena's financing, with the potential for allegations that risk was not adequately articulated to investors.
Additional evidence to fuel speculation over the potential for a securities lawsuit alleging securities fraud.
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