§ 59-125-420 — Procedures and covenants for repayment.

To the end that the payment of the principal and interest of the bonds authorized by this article is secured adequately, the trustees of Winthrop may: (1) issue bonds in such amount within the limitations provided for in this article as the trustees consider necessary. It is lawful for the trustees to use a portion of the principal proceeds derived from any sale of bonds, except bonds issued to effect refunding of outstanding bonds, to meet the payment of interest on the bonds for a period equal to the period of construction of the facilities to be financed with the proceeds of such bonds plus a period not exceeding six months. It is recognized by the General Assembly that until the facilities to be constructed with the proceeds of the loan are completed, an undue burden may be imposed upon the existing revenues at that time; (2) pledge the revenues or the net revenues of the facilities as designated by the trustees in connection with the issuance of the bonds whether then or after that time to be existing and to pledge any otherwise available gifts, grants, or donations to Winthrop for the payment of the principal of and interest on the bonds as they respectively mature. However, any surplus of the revenues or net revenues available after the payment of costs of operation and maintenance of the facilities and of debt service on the bonds, and the establishment of any debt service reserve obligation under the proceedings providing for the issuance of the bonds, is placed in a contingency and improvement fund for the facilities in order to restore depreciated or obsolete items of the facilities, to make improvements to the facilities, to defray the cost of unforeseen contingencies with regard to the facilities, to prevent defaults under such bonds, or to redeem any of the bonds; (3) further secure the bonds with a pledge of any additional revenues or fees of Winthrop as may be authorized under other laws of this State; (4) covenant that no facilities owned by Winthrop may be used free of charge, or to specify and limit the facilities which may be used free of charge; (5) covenant to establish and maintain a system of rules as will ensure the continuous use and occupancy of the facilities whose revenues are pledged to secure any bonds; (6) covenant that an adequate schedule of charges be established and maintained for the facilities designated by the trustees, whose revenues or net revenues are pledged to secure the bonds, to the extent necessary to produce sufficient revenues to: (a) pay the cost of operating and maintaining the facilities, whose revenues or net revenues are pledged for the payment of the bonds, including the cost of fire, extended coverage and use, and occupancy insurance; (b) pay the principal and interest of the bonds as they respectively become due; (c) create and at all times maintain an adequate debt service reserve fund to meet the payment of the principal and interest; and (d) create and at all times maintain an adequate reserve for contingencies and for major repairs and replacement. (7) covenant against the mortgaging or disposing of the facilities designated by the trustees, whose revenues or net revenues are pledged for the payment of the bonds, and against permitting or suffering any lien to be created on them equal or superior to the lien created for the benefit of such bonds. The trustees are empowered to discontinue the use of or demolish obsolete facilities and to reserve the right, under the terms they prescribe, to issue additional bonds on a parity with the bonds authorized by this article, if at some later date they obtain legislative authorization for the issuance of additional bonds; (8) covenant as to the use of the proceeds derived from the sale of any bonds issued pursuant to this article; (9) provide for the terms, form, registration, exchange, execution, and authentication of bonds, and for the replacement of lost, destroyed, or mutilated bonds; (10) make covenants with respect to the use of the facilities to be constructed with the proceeds of the bonds authorized by this article and of the other facilities whose revenues must be pledged for the payment of the bonds; (11) covenant that all revenues or net revenues of the particular facilities pledged for the payment of the bonds must be segregated into special funds and that the funds must be used solely for the purposes for which they are intended and for no other purpose; (12) covenant for the mandatory redemption of bonds on the terms and conditions as the resolutions authorizing the bonds prescribe; (13) provide for early defeasance of bonds through the establishment of special escrow accounts maintained by a corporate trustee, which may be the State Treasurer, of cash or United States government obligations, or obligations of agencies of them, which escrows may be funded with proceeds of bonds issued under the provisions of this article or revenues or other funds available to Winthrop; (14) prescribe the procedure, if any, by which the terms of the contract with the bondholders may be amended, the number of bonds whose holders must consent to it, and the manner in which consent is given; (15) covenant as to the maintenance of the facilities, whose revenues must be pledged for the payment of the bonds, the insurance to be carried on them, and the use and disposition of proceeds from any insurance policy; (16) prescribe the events of default and the terms and conditions upon which all or any bonds become or may be declared due before maturity and the terms and conditions upon which the declaration and its consequences may be waived; (17) impose a statutory lien upon the facilities designated by the trustees, the revenues or net revenues of which must be pledged to secure the bonds. The lien must extend to the facilities, to their appurtenances and extension, to their additions, improvements, and enlargements to the extent specified in the resolutions and must inure to the benefit of the holders of the bonds secured by the lien. The facilities remain subject to the statutory lien until the payment in full of the principal and interest of the bonds. A holder of a bond, or any of the coupons representing interest on them, either at law or in equity, by suit, action, mandamus, or other proceedings, may protect and enforce the statutory lien, and by suit, action, mandamus, or other proceedings may enforce and compel performance of all duties of the trustees, including the fixing of sufficient rates, the proper segregation of the revenues, and the proper application of them. However, the statutory lien may not be construed to give the bond or coupon holder authority to compel the sale of any of the facilities or any part of them; (18) covenant that if there is a default in the payment of the principal of or interest upon any of the bonds, a court having jurisdiction in any proper action may appoint a receiver to administer and operate the facilities designated by the trustees, whose revenues or net revenues are pledged for the payment of the bonds, with power to fix rates and charges for the facilities, sufficient to provide for the payment of the expense of operating and maintaining the facilities, and to apply the income and revenues of the facilities to the payment of the bonds and the interest on them; (19) establish on or before the delivery of any bonds issued pursuant to this article a debt service reserve fund and to cause it to be deposited with a corporate trustee, who may be the State Treasurer, and to that end, the trustees are empowered to utilize any monies available for that purpose, including revenues previously accumulated from the facilities before the issuance of bonds. In the discretion of the trustees, in lieu of cash, the debt service reserve fund may be funded with a surety bond, insurance policy, letter of credit, line of credit, or similar guarantee. At the discretion of the trustees, Winthrop may purchase an insurance policy insuring payment of both principal and interest on any issuance of bonds under the provisions of this article; (20) appoint a corporate trustee, who may be the State Treasurer, or paying agent to whom must be paid all or any portion of the revenues or net revenues pledged to the payment of the bonds or derived from the operation of the facilities, and to prescribe the manner in which these revenues or net revenues must be utilized and disposed of. The corporate trustee shall serve in a fiduciary capacity as trustee for the bondholders under the resolutions of the trustees authorizing the issuance of bonds.

Legislative History

HISTORY: 1996 Act No. 399, SECTION 2.