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LCEC_Summer2012_LegalLetters

LCEC_Summer2012_LegalLetters

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Published by Irving Blog
Letters between lawyers for Irving and development partner Las Colinas Group about plans for an entertainment center and an impending deadline to get financing.
Letters between lawyers for Irving and development partner Las Colinas Group about plans for an entertainment center and an impending deadline to get financing.

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Published by: Irving Blog on Jul 16, 2012
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07/10/2013

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FIGARI
&
DAVENPORT
AREGlSTFREDLIMITEDLIABILITYPARTNERSHIPINCLUDINGLlMITEDLIABILITYPARTNERSHIPS
Writer'sDirectDialNumber
(214)939-2011
3400BankofAmericaPlaza901MainStreet,LB125Dallas,Texas75202-3796214-939-2000
FAX:
214-939-2090Writer'sE-MailAddressparker.young@figdav.com
June8,2012
ViaE-Mail
Mr.CarlKlinkeMunschHardtKopf
&
Harr,P.C,3800LincolnPlaza500NorthAkardStreetDallas,Texas75201Re:
SecondAmendedandRestatedEntertainmentCenterDevelopmentAgreement,asamended,betweentheCityofIrving(the"City"]andLasColinasGroup,LP("LCG")
DearCarl:Wereceivedyouremailyesterdaywiththenewproposalthatdescribesyetanotherproposedre-structuringandamendmentoftheDevelopmentAgreement.ApparentlyyoumisunderstoodwhatIwastryingtosayinourcallyesterday,TheCity'sconcernisnotsimplythattheproposalsfromyoursidewerecomingfromFIFLPorTDI,ratherthanLCG.Instead,theissuewasthatLCGhasobviouslybeenposturingitselffromalegalperspectiveregardingthecurrentcontractandhasrepeatedlythreatenedtheCityanditsofficialswithlitigation.BeforetheCityinveststhetime,effort,andexpenseofconsideringfundamentalchangestothetermsofthedealthathasalreadybeenstruck,itwantstoknowthatitisnotgoingtogetsuedbyyourclientsdowntheroadifthepartiescannoteventuallyagreeuponareviseddealstructure.Thatconcernappliesregardlessofwhichentityistechnicallymakingthealternativeproposals.Thisisnowthefourthdifferentre-structuringproposaltheCityhasreceivedorheardaboutfromyourclientsinthelasttwoweeks,includingseveralproposalswhichLCGencouragedtheCitytodiscussandnegotiatewithapossibleReplacementDeveloper.Alloftheproposalsincludematerialrevisionstotheparties'existingagreement.ThisseemstoindicatethatLCGisnowfocusingitseffortsonpursuingalternativefinancingstructuresandbusinessarrangementstocompletetheproject,notonproceedingtoclosethetransactiononthetermscurrentlycontemplatedbytheDevelopmentAgreement.
 
Mr.CarlKlinkeJune8,2012Page2AtthesametimethatLCOanditsassociateshavebeensubmittingmultiplenewproposalstotheCity,however,theCityalsoreceivedLCG'sletterofJune4,2012,inwhichLCGstatesthatit"doesnotagreethatitisnolongerabletocompleteitsobligationsundertheDevelopmentAgreementorthatitdesirestoterminatetheDevelopmentAgreement."
If
LCOtrulybelievesthatitisabletofulfillallofitsobligationsnecessarytoclosethetransactionbytheAugust6,2012,ClosingDate,thentheCityprefersthatitdoso,ratherthanpursuingotherproposalsthatincludelengthydelaystotheprojectandsubstantialrevisionstoafinancialstructurethatbothpartieshavealreadyagreedto.Asyouknow,LCGiscurrentlyobligatedtofundallTotalEntertainmentCenterCostsinexcessoftheNetBondProceeds.TheNetBondProceeds,ofcourse,cannotexceedtheamountwhichtheCitycanlegallyissue.ThelawrequiresaninvestmentgraderatingonbondsissuedbytheCity,andtheDevelopmentAgreementaccordinglyrecognizesthattheCityisundernoobligationtoissuebondsthatdonothaveaninvestmentgraderating.TheCitywasadvisedonMay
so"
thata"B"ratingwouldbeassignedtothebondsiftheywereissuedintheamountthatwouldbenecessarytocompletetheprojectbaseduponanestimated$80millionPartnershipContribution.Thus,theCitycannotlegallyissuebondsinthatamount.TheDevelopmentAgreementdoesnotlimitthePartnershipContributiontoonly$80mil1ion,soLCGcouldcertainlycommittoagreatercontributionifitchosetodoso.TheconflictingpositionstakenbyLCGandtherecentbondratingdevelopmentspresentanobviousquestion:IsLCOableandpreparedtofundanincreasedestimatedPartnershipContributionunderthefinancialstructureofthe
existing
agreementandclosebyAugust6
th
?
Ifso,whencantheCityexpecttoreceivefromLCOtheLoanCommitmentrequiredbySection1.28oftheDevelopmentAgreement?
If
LeOisunwillingorunabletoincreaseitsPartnershipContributiontotheamountthatwouldbenecessaryunderthepresentagreements,andthepartiesbothagreethattheAugust6ClosingDatethereforecannotbemet,thentheCitywillcertainlybeinterestedinexploringotherpossiblewaystocompletetheEntertainmentCenter.ButitisnotinterestedinconsideringornegotiatingalternativedealstructuresthatfundamentallychangetherespectiverightsandobligationsofthepartieswhileitremainsunderthethreatofpossibleclaimsandlitigationfromLCGorTHGifanewstructureisnoteventuallyagreedupon.TheCityproposedthatthepartiesenterintofullandcompletemutualreleasesbeforediscussingalternativefinancialarrangementsfortheproject.YouhaveindicatedthismorningthatLCOandTHOareunwillingtoexchangereleaseswiththeCity.
If
thatremainstheirposition,thentheCitywill,ofcourse,
 
Mr.
CarlKlinkeJune8,2012Page3continuetocommunicateandworkwithLCGinconnectionwiththeparties'obligationsundertheexistingtermsoftheDevelopmentAgreementwhileitremainseffective.Obviously,iftheAugust6
th
ClosingDateistobemet,timeisoftheessencetogettheseissuesresolved.Ilookforwardtohearingfromyouonthesemattersassoonaspossible.
PDY/kk

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