THIS PRELIMINARY OFFICIAL STATEMENT has been “deemed final” within the meaning of and with the exception of certain information permitted to be omitted by Rule 15c2‑12 of the Securities and Exchange Commission, and the information contained herein is subject to completion and amendment in accordance with applicable law. The issuer of the securities will deliver a final Official Statement in accordance with Rule 15c2‑12. The securities herein described may not be sold nor any offer to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. thereon areexemptfromtaxationunderthelawsofStateAlabama(See“TAXEXEMPTION”herein). Counsel isfurtheroftheopinionthatunderexistinglawaspresentlyinterpreted,Bondsandinterest calculating thefederalalternativeminimumtaxthatmaybeimposedoncorporationsandindividuals.Bond and subjecttothelimitationssetforthherein,butinterestonBondswillbetreatedasapreferenceitemin interest ontheBondsisexcludablefromgrossincomeforFederaltaxpurposesuponconditions Birmingham, Alabama, Bond Counsel, under existing laws, regulations, rulings and judicial decisions, * Preliminary, subject to change. Dated: May__, 2017 Dated: DateofDelivery NEW ISSUE-BOOKENTRYONLY in NewYork,Yorkon oraboutMay__,2017. Bonds indefinitiveform willbeavailablefordeliverythroughthefacilities ofDTCagainstpaymenttherefor Alabama, andfortheCompany bySchreeder,Wheeler&Flint,LLP,Atlanta, Georgia. Itisanticipatedthatthe Certain legalmatterswill bepasseduponfortheUnderwriterbyMaynard,Cooper &Gale,P.C.,Birmingham, Waldrep, Stewart&Kendrick,LLC,Birmingham, Alabama,BondCounsel,andcertainotherconditions. THE BONDS.AUTHORITYHASNOTAXINGPOWER. SEE“BONDHOLDER’SRISKS”HEREIN. FINANCIAL CONDITIONANDTHERISKS INVOLVED TODETERMINETHESUITABILITYOF INVESTING IN ARE SUBJECT TO CERTAIN RISKS. EACH PROSPECTIVE INVESTOR SHOULD CONSIDER HIS OR HER OF THEPRINCIPALORINTERESTONBONDS OROTHERCOSTSINCIDENTTHERETO.THEBONDS ANY POLITICALSUBDIVISIONORAGENCYTHEREOF ORTHEAUTHORITYISPLEDGEDTOPAYMENT THEREOF. NEITHERTHEFAITHANDCREDITNOR THETAXINGPOWEROFSTATEALABAMAOR FROM PAYMENTSMADEBYTHECOMPANYTHAT AREPLEDGEDBYTHEAUTHORITYTOPAYMENT THE PRINCIPAL OF OR THE INTERESTON THE BONDSOR OTHER COSTS INCIDENTTHEREOF, EXCEPT SUBDIVISION ORAGENCYOFTHESTATEALABAMAAUTHORITYSHALLBEOBLIGATED TOPAY OR ANYPOLITICALSUBDIVISIONTHEREOF.NEITHERTHESTATEOFALABAMANOR and mandatoryredemptionpriortomaturityasdescribedherein. denominations of$25,000andintegralmultiples$5,000inexcessthereof.TheBondsaresubjectto optional November 1,2017.TheBondsareissuableonlyasfullyregisteredbondswithoutcouponsinminimum “Accredited Investors”.See“RESTRICTIONSONOWNERSHIPANDTRANSFER”. the SecuritiesAct).TransfersofBondswillbelimitedtoonly“QualifiedInstitutionalBuyers” or in Rule144AundertheSecuritiesAct)or“AccreditedInvestors”(asdefined501(a) under act. TheBondsarebeingofferedandsoldherebyonlyto“QualifiedInstitutionalBuyers”(as defined registered undertheSecurities Act of 1933, as amended (the “Securities Act”), or any state securities “Company”). (the “LeaseAgreement”)betweentheAuthorityandCWIAlabama,LLC,aGeorgialimitedliabilitycompany (the solely fromandsecuredbyrentalpaymentstobemadepursuantaLeaseAgreementdatedasofMay 1,2017 the AuthoritytoWilmingtonTrust,NationalAssociation,astrustee(the“Trustee”).TheBondswillbe payable be issuedunderandsecuredbyaMortgageTrustIndenturedatedasofMay1,2017(the“Indenture”),from The Bondsareofferedwhen,asandifissuedby the Authority,subjecttoapprovaloflegalityby THE BONDSARENOTADEBTORPLEDGEOFFAITHANDCREDITSTATEALABAMA Interest ontheBondswillbepayablesemiannuallyeachMay1andNovember1,commencing There arerestrictionsonwhomaypurchasetheBonds.TheBondsofferedherebyhavenotbeen The BondsarelimitedobligationsofCherokeeSolidWasteDisposalAuthority(the“Authority”),andwill Assuming compliancewithcertaincovenants,intheopinionofWaldrep,Stewart&Kendrick.,LLC, CHEROKEE SOLID WASTE DISPOSAL AUTHORITY (AL) PRELIMINARY OFFICIAL STATEMENT DATED MAY 2, 2017 ____% Tax-ExemptSolidWasteDisposalRevenueBonds
(CWI Alabama,LLCProject),Series2017
DUNCAN-WILLIAMS, INC. Price ofallBonds:____ $6,000,000*
Due: May1,2037 NOT RATED
No dealer, salesman, or any other person has been authorized by the Authority, the Company, or the Underwriter to give information or to make any representations with respect to the Bonds, other than those contained in this Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. Certain information contained herein has been obtained from the Company and other sources that are believed to be reliable, but the accuracy or completeness of such information is not guaranteed by, and such information is not to be construed to be a representation of, the Authority or the Underwriter. Neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the parties referred to above since the date hereof.
The Authority neither has assumed nor will assume any responsibility as to the accuracy or completeness of the information in this Official Statement, other than that relating to “The Authority” and “Absence of Material Litigation.”
UNDER NO CIRCUMSTANCES SHALL THIS OFFICIAL STATEMENT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE SECURITIES DESCRIBED HEREIN IN ANY JURISDICTION IN WHICH SAID OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACT. THE REGISTRATION OR QUALIFICATION OF THE BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF SECURITIES LAWS OF THE STATES IN WHICH THE BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.
THIS PRELIMINARY OFFICIAL STATEMENT HAS BEEN DEEMED FINAL BY THE AUTHORITY AS OF ITS DATE WITHIN THE MEANING OF RULE 15c2-12 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT FOR THE OMISSIONS OF THE OFFERING PRICE(S), INTEREST RATE(S), SELLING COMPENSATION, AGGREGATE PRINCIPAL AMOUNT, PRINCIPAL AMOUNT PER MATURITY, DELIVERY DATE(S) AND OTHER TERMS OF THE BONDS DEPENDING ON SUCH MATTERS, ALL OF WHICH ARE PERMITTED OMISSIONS UNDER RULE 15c2-12.
All quotations from and summaries and explanations of provisions of laws and documents herein do not purport to be complete, and reference is made to such laws and documents for full and complete statements of their provisions.
The order and placement of material in this Official Statement, including its appendices, are not to be deemed a determination of relevance, materiality or importance, and all material in this Official Statement, including its appendices, must be considered in its entirety.
The information in this Official Statement has been obtained from sources which are considered dependable and which are customarily relied upon in the preparation of similar official statements, but such information is not guaranteed as to accuracy or completeness.
All estimates and assumptions contained herein are believed to be reliable, but no representation is made that such estimates or assumptions are correct or will be realized.
No person, including any broker, dealer or salesman, has been authorized to give any information or to make any representation other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by the Authority or the Company.
In connection with this offering, the Underwriter may over allot or effect transactions which stabilize or maintain the market price of the Bonds offered hereby at a level above that which might otherwise prevail in the open
ii market, and such stabilizing, if commenced, may be discontinued at any time. The prices and other terms of the offering and sale of the Bonds may be changed from time to time by the Underwriter after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial offering prices, including sales to dealers, without prior notice.
The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
This Official Statement is being provided to prospective purchasers either in bound printed format or in electronic format. This Official Statement may be relied upon only if it is in its bound printed format or as printed in its entirety in such electronic format.
iii
TABLE OF CONTENTS INTRODUCTION ...... 1 THE AUTHORITY ...... 2 THE BONDS ...... 2 General ...... 2 Redemption Prior to Maturity ...... 3 Trustee, Paying Agent and Registrar ...... 5 RESTRICTIONS ON OWNERSHIP AND TRANSFER ...... 5 BOOK-ENTRY SYSTEM ...... 6 Discontinuation of Book-Entry Only System ...... 8 ESTIMATED SOURCES AND USES OF FUNDS ...... 9 ANNUAL DEBT SERVICE REQUIREMENTS ...... 10 SECURITY FOR THE BONDS ...... 11 Nature of the Authority’s Obligation ...... 11 Nature of the Company’s Obligation ...... 11 THE COMPANY ...... 12 In General ...... 12 Landfill Experience ...... 12 Additional Information ...... 12 THE PROJECT ...... 13 General ...... 13 The Project Site ...... 13 Access and Transportation ...... 14 The Permit ...... 14 Estimated Airspace and Useful Life of the Project Site ...... 15 Coal Waste ...... 17 Host Community and Royalties ...... 19 Project Site Development Plan ...... 19 Competition ...... 20 Local Market Data ...... 22 Environmental and Site Considerations ...... 22 Summary of the Company’s Forecast ...... 23 Estimate of Value and Developmental Review ...... 24
iv FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA ...... 25 BONDHOLDER RISKS ...... 26 Lack of Operating History; Losses During Startup Period ...... 26 No Assurance of Successful Implementation of Business Strategy...... 26 Need for Additional Financing; No Assurance of Available Financing ...... 26 Transfer Station ...... 27 Competition - General ...... 27 Competition – The Project ...... 27 Environmental Risks and Regulations ...... 27 Operating Risks and Possible Insufficiency of Insurance ...... 30 Environmental Impairment Liability ...... 30 Cash Flow and Liquidity Constraints ...... 30 Future Facility Costs and Commitments ...... 31 Dependence on Executive Officers ...... 31 Permitting ...... 31 Litigation ...... 31 Security Limitations ...... 31 Limited Marketability of the Bonds ...... 32 Additional Obligations of the Company ...... 32 Enforceability of Certain Contracts ...... 32 Tax-Exempt Status of Bonds ...... 32 Sterner Report ...... 33 THE INDENTURE ...... 34 Pledge and Security ...... 34 Application of Proceeds ...... 34 Funds and Accounts ...... 34 Flow of Funds ...... 35 Additional Bonds ...... 36 Investments ...... 38 Non-Presentment of Bonds ...... 38 Defaults and Remedies ...... 39 Waivers of Events of Default ...... 40 Supplemental Indentures ...... 40 Amendments to the Lease Agreement ...... 42 Discharge of the Indenture ...... 43
v Removal of Trustee ...... 43 THE LEASE AGREEMENT ...... 43 Payments ...... 43 Prepayment of the Lease ...... 44 Obligations Absolute and Unconditional ...... 44 Obligation to Maintain Adequate Rates ...... 44 Maintenance of Corporate Existence; Consolidation or Merger ...... 44 Tax Covenants ...... 45 Defaults ...... 45 Remedies ...... 46 Amendments ...... 47 TAX EXEMPTION ...... 47 Original Issue Discount ...... 48 LEGAL MATTERS ...... 49 NO RATINGS ...... 49 ABSENCE OF MATERIAL LITIGATION REGARDING THE BONDS ...... 49 UNDERWRITING ...... 50 CONTINUING DISCLOSURE ...... 50 CERTIFICATION AS TO OFFICIAL STATEMENT ...... 51 MISCELLANEOUS ...... 51
APPENDIX A – FORM OF BOND COUNSEL OPINION APPENDIX B - VALUE ESTIMATION AND REVIEW OF THE PROJECT APPENDIX C - FORM OF CONTINUING DISCLOSURE AGREEMENT APPENDIX D – FORM OF INVESTOR LETTER
vi
The following information is qualified in its entirety by reference to the more detailed information appearing elsewhere in this Official Statement and the Appendices hereto. Information provided hereby by the Company contains, and from time to time the Company may disseminate materials and make statements which may contain “forward-looking” information, as that term is defined by the Private Securities Litigation Reform Act of 1995 (the “1995 Act”). These cautionary statements are being made pursuant to the provisions of the 1995 Act and with the intention of obtaining the benefits of the “safe harbor” provisions of the 1995 Act. Cherokee Solid Waste Disposal Authority $6,000,000* __% Tax Exempt Solid Waste Disposal Revenue Bonds (CWI Alabama, LLC Project), Series 2017
INTRODUCTION This Official Statement, including the appendices hereto, sets forth certain information in connection with the issuance and sale by the Cherokee Solid Waste Disposal Authority (the “Authority”), of $6,000,000* in ____% Tax-Exempt Solid Waste Disposal Revenue Bonds (CWI Alabama, LLC Project), Series 2017 (the “Series 2017 Bonds” or the “Bonds”). The Bonds will be equally and ratably secured by, and issued pursuant to, a Mortgage and Trust Indenture dated as of May 1, 2017 (the “Indenture”), from the Authority to Wilmington Trust, National Association, as trustee (the “Trustee”). The Bonds are being issued pursuant to the laws and constitution of the State of Alabama, particularly Section 11-89A-1 et seq., of the Code of Alabama 1975, as amended, and other applicable provisions of law (collectively, the “Act”) and a resolution of the Authority adopted on May __, 2017 (the “Resolution”). The Bonds are being issued for the purpose of (i) acquiring a solid waste landfill (the “Landfill”), acquiring certain vehicles, machinery and equipment (the “Equipment”) and for the construction of certain improvements (the “Improvements”) on real property (the “Real Property”) located in Colbert County, Alabama (the “County”), which purposes shall include reimbursement of certain funds already expended for such purposes, (ii) funding a Debt Service Reserve Fund for the Bonds, and (iii) paying the cost of issuing the Bonds (the Landfill, the Equipment, the Improvements and the Real Property are collectively referred to herein as the “Project”). The Project will be leased by the Authority to CWI Alabama, LLC, a Georgia limited liability company (the “Company”), pursuant to a lease agreement dated as of May 1, 2017 (the “Lease Agreement”), which provides, among other things, for rental payments at times and in amounts sufficient to pay when due all principal of and interest (and premium, if any) on the Bonds. The Authority’s interest in the Lease Agreement will be pledged and assigned to the Trustee as security for the Bonds. The fee title to the Project is owned by the Authority. For information regarding the Company and the Project, see “THE COMPANY” and “THE PROJECT” herein. ______*Preliminary, subject to change.
1 There follow brief descriptions of the Authority, the Bonds, the Project, the Company, the Lease Agreement and the Indenture. Such descriptions do not purport to be comprehensive or definitive. The descriptions herein of the Lease Agreement and the Indenture are qualified in their entirety by reference to such documents, copies of which are available for inspection at the office of the Trustee. During the period of the offering, copies of the Indenture and the Lease Agreement may be obtained from the Underwriter. The descriptions herein of the Bonds are qualified in their entirety by reference to the form thereof included in the Indenture. Capitalized terms used herein but not otherwise defined have the respective meanings assigned to them in the Indenture.
THE AUTHORITY
Cherokee Solid Waste Disposal Authority (the “Authority”) is a public corporation created under and pursuant to Section 11-89A-1 et seq., Code of Alabama 1975, as amended (the “Act”). The Authority has the requisite statutory authority to serve as the issuer of the Bonds and to lease the Project to the Company pursuant to the Lease Agreement (as described herein). The Authority will receive an annual Issuer fee in the amount of $10,000 in connection with the issuance of the Bonds.
THE BONDS
General
The Bonds are dated the date of their delivery and will mature on May 1, 2037. Interest on the Bonds will be paid semiannually on each May 1 and November 1, commencing November 1, 2017, and will be computed on the basis of a 360-day year of twelve 30-day months. The Bonds will bear interest from their date at the rate of ____% per annum.
The Bonds are fully registered bonds without coupons in minimum denominations of $25,000 and integral multiples of $5,000 in excess thereof. Exchanges and transfers will be made without charge to the owners, provided that in each case, the Trustee will require the payment by the owner requesting exchange or transfer of any tax or governmental charge required to be paid with respect thereto. Principal of and premium, if any, on the Bonds will be payable at the principal corporate trust office of the Trustee. Interest on the Bonds will be payable by check or draft mailed to the persons in whose names they are registered at the close of business on the 15th day of the month next preceding each interest payment date (the “Record Date”), or, at the option of any registered owner of not less than $500,000 principal amount of the Bonds, by wire transfer to any address in the continental United States on the applicable interest payment date to such owner as of the applicable Record Date if such owner provides the Trustee with written notice of such wire transfer address at least 15 days prior to such Record Date, which notice may provide that it will remain in effect with respect to subsequent interest payment dates unless and until changed or revoked by subsequent notice.
2 Redemption Prior to Maturity Mandatory Sinking Fund Redemption of Bonds. The Bonds are subject to mandatory redemption pursuant to mandatory sinking fund requirements, at a redemption price of 100 percent of the principal amount redeemed plus interest accrued to the redemption date, beginning on May 1, 2021, in the following principal amounts on May 1 of the years specified below: Year Amount* Year Amount* 2021 $ 195,000 2030 $ 325,000 2022 205,000 2031 345,000 2023 220,000 2032 370,000 2024 230,000 2033 390,000 2025 245,000 2034 415,000 2026 260,000 2035 440,000 2027 275,000 2036 465,000 2028 290,000 2037 495,000 2029 310,000 Mandatory Redemption Upon Unenforceability. The Series 2017 Bonds are subject to mandatory redemption in whole in the event that the Lease Agreement shall have become void or unenforceable or impossible of performance in accordance with the intent and purpose of the parties as expressed therein by reason of any changes in the Constitution of the State of Alabama or the Constitution of the United States of America, or by reason of legal or administrative action (whether state or federal) or any final decree, judgment or order of any court (whether state or federal) entered after the contest thereof with the opportunity for the contest thereof by the Company and the Issuer, the Holder or the Trustee in good faith. Extraordinary Optional Redemption Without Premium. The Bonds are subject to redemption in whole, but not in part, on any date at a redemption price equal to the aggregate principal amount of the Bonds plus accrued interest thereon to the redemption date, without premium, if the Company exercises its option under the Lease Agreement to prepay the payments due thereunder and thereby effect the redemption of such Bonds in whole upon the occurrence of any of the following events: (a) The Project shall have been damaged or destroyed (i) to such extent that the Project cannot reasonably be restored within a period of six months to the condition thereof immediately preceding such damage or destruction, or (ii) to such extent that the Company is thereby prevented from carrying on its normal operations at the Project for a period of six months. (b) Title to, or the temporary use of, all or a substantial portion of the Project shall have been taken under the exercise of the power of eminent domain by any governmental authority, or person, firm or corporation acting under governmental Authority, (i) to such extent that the Project cannot reasonably be restored within a
*Preliminary, subject to change
3 period of six months to a condition of usefulness comparable to that existing prior to such taking, or (ii) if such taking results in the Company being thereby prevented from carrying on its normal conditions at the Project for a period of six months. Optional Redemption of Bonds. The Series 2017 Bonds are subject to optional redemption, in whole or in part on any date on or after May 1, 202_, at the direction of the Company, at a redemption price equal to the par amount of Series 2017 Bonds so redeemed, plus accrued interest to and including the date of redemption.
Mandatory Redemption of Bonds Upon Determination of Taxability. The Series 2017 Bonds are subject to mandatory redemption in whole on the earliest practicable date selected by the Trustee, after consultation with the Company, for which timely notice of redemption can be given by the Trustee after the occurrence of a Determination of Taxability, but in no event later than 90 days following the Trustee’s notification of the Determination of Taxability, at a redemption price equal to 103% of the aggregate principal amount of the Series 2017 Bonds plus accrued interest thereon to the redemption date. The foregoing amount shall constitute the total compensation due the Bondholders as a result of the occurrence of a Determination of Taxability. “Determination of Taxability” means the receipt by the Trustee of evidence of a judgment or order of a court of competent jurisdiction, or a final ruling, technical advice or decision of the Internal Revenue Service, or a written opinion by Bond Counsel, to the effect that the interest on the Bonds (other than interest on any Bond for any period during which such 2017 Bond is held by a “substantial user” of the Project or a “related person” as such terms are used in Section 147(a) of the Internal Revenue Code of 1986, as amended) is includable for Federal income tax purposes in the gross incomes of recipients thereof; provided, however, that in no event shall a Determination of Taxability be based upon inclusion of interest in any minimum tax or indirect tax.
Mandatory Redemption From Unused Proceeds. The Series 2017 Bonds are subject to mandatory redemption in part to the extent of unused proceeds in the Project Fund (as hereinafter defined) on the earlier of the Interest Payment Date next succeeding the Project Completion Date or May 1, 2020, at a redemption price of 100% of the principal amount redeemed plus accrued interest to the redemption date unless, at least 60 days prior to such Project Completion Date or May 1, 2020, the amounts on deposit in the Project Fund have been expended. The Series 2017 Bonds are also subject to mandatory redemption in the event and to the extent that the Company files a certificate with the Trustee, signed by an authorized Company representative, to the effect that the Improvements have been amended and specifying the amount of funds in the Project Fund that are no longer necessary to acquire and construct the Improvements and are to be used to redeem Series 2017 Bonds of such series as are allocable to the subaccount of the Project Fund from which such unused proceeds are deposited.
Partial Redemption. If fewer than all of the Bonds are to be redeemed, the selection of Bonds to be redeemed, or portions thereof, in amounts equal to $5,000 or any integral multiple thereof shall be made by lot by the Trustee in any manner which the Trustee may determine. If it is determined that one or more Bonds are to be called for redemption, then upon notice of redemption of Bonds, the Owner of that Bond shall surrender the Bond to the Trustee (a) for
4 payment of the redemption price of the Bond(s) called for redemption (including without limitation, the interest accrued to the date fixed for redemption and any premium), and (b) for issuance, without charge to the Owner thereof, of a new Bond or Bonds of the same series, in such integral amounts as are permitted hereunder, aggregating a principal amount equal to the unmatured and unredeemed portion of, and bearing interest at the same rate and maturing on the same date as, the Bond(s) surrendered.
Notice and Effect of Redemption. Not less than thirty (30) days nor more than forty-five (45) days prior to any redemption date, the Trustee shall cause notice of the call for redemption to be given in the name of the Authority identifying each Bond to be redeemed, the redemption date, the redemption price and that interest on the Bond shall cease to accrue from and after the redemption date, which notice shall be sent by registered or certified mail, postage prepaid, to the owner of each Bond to be redeemed at the address of such owner shown on the registration books. Failure to give any such notice to the owner of any Bond, or any defect therein, shall not affect the sufficiency or validity of any proceeding for the redemption of any other Bonds for which the proper notice was given.
If less than all of the Bonds shall be called for redemption, the portion of the Bonds to be redeemed shall be selected in such manner as the Trustee shall determine. On the date designated for redemption, any Bond so called for redemption shall become due and payable and, provided that sufficient funds for the payment of the redemption price thereof are then on deposit with the Trustee, interest thereon will cease to accrue.
Trustee, Paying Agent and Registrar
Wilmington Trust, National Association, is Trustee under the Indenture and also has been appointed Paying Agent and Registrar. The Bonds will be administered at the Trustee’s office located in Dallas, Texas.
RESTRICTIONS ON OWNERSHIP AND TRANSFER The Bonds are offered and transferred only to and may be owned only by “Qualified Institutional Buyers” (as defined in Rule 144A under the Securities Act) or “Accredited Investors” (as defined in Rule 501(a) under the Securities Act). The Underwriter may require any purchaser or potential purchaser of the Bonds to prove its status as a “Qualified Institutional Buyer” or an “Accredited Investor,” and the Underwriter will require each initial purchaser of the Bonds to deliver an investment letter in the form attached hereto as Appendix D. The physical Bond certificates will state such transfer restrictions on the legend thereon. The Trustee shall have no duty or obligation for determining whether any Beneficial Owner (as defined below under “BOOK-ENTRY SYSTEM”) or registered holder of any Bond is a “Qualified Institutional Buyer” or an “Accredited Investor”.
5 BOOK-ENTRY SYSTEM
Portions of the following information concerning The Depository Trust Company ("DTC") and DTC’s book-entry system have been obtained from DTC. The Authority and the Underwriter make no representation as to the accuracy of such information. Initially, DTC will act as securities depository for the Series 2017 Bonds. The Series 2017 Bonds initially will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. Initially, one fully-registered Series 2017 Bond certificate for each maturity will be issued for the Series 2017 Bonds, in the aggregate principal amount of the Series 2017 Bonds of such maturity, and will be deposited with DTC.
DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. So long as the Series 2017 Bonds are maintained in book-entry form with DTC, the following procedures will be applicable with respect to the Series 2017 Bonds.
Purchases of the Series 2017 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2017 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2017 Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2017 Bonds are
6 to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2017 Bonds, except in the event that use of the book-entry system for the Series 2017 Bonds is discontinued.
To facilitate subsequent transfers, all the Series 2017 Bonds deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Series 2017 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2017 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2017 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
As long as the book-entry system is used for the Series 2017 Bonds, redemption notices will be sent to DTC. If less than all of the Series 2017 Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
As long as the book-entry system is used for the Series 2017 Bonds, principal, premium, if any, and interest payments on the Series 2017 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Trustee on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority and the Trustee and disbursement of such payments to the Participants or the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2017 Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Trustee as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Series 2017 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
7 DTC may discontinue providing its services as securities depository with respect to the Series 2017 Bonds at any time by giving reasonable notice to the Authority or the Trustee. In addition, the Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). Under either of such circumstances, in the event that a successor securities depository is not obtained, bond certificates are required to be printed and delivered.
The Authority, the Trustee and the Underwriter cannot and do not give any assurances that DTC or the Participants will distribute to the Beneficial Owners of the Series 2017 Bonds (1) payments of principal, redemption price or interest on the Series 2017 Bonds; (2) certificates representing an ownership interest or other confirmation of beneficial ownership interests in Series 2017 Bonds; or (3) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Series 2017 Bonds, or that they will do so on a timely basis or that DTC or Participants will serve and act in the manner described in this Preliminary Official Statement. The current “rules” applicable to DTC are on file with the United States Securities and Exchange Commission, and the current “procedures” of DTC to be followed in dealing with DTC participants are on file with DTC. The Authority, the Underwriter and the Trustee will have no responsibility or obligation to any securities depository, any Participants in the book-entry system, or the Beneficial Owners with respect to (i) the accuracy of any records maintained by the securities depository or any Participant; (ii) the payment by the securities depository or by any Participant of any amount due to any Participant or Beneficial Owner, respectively, in respect of the principal amount or redemption or purchase price of, or interest on, any of the Series 2017 Bonds; (iii) the delivery of any notice by the securities depository or any Participant; (iv) the selection of the Beneficial Owners to receive payment in the event of any partial redemption of the Series 2017 Bonds; (v) the Series 2017 Bonds; or (vi) any other action taken by the securities depository or any Participant. Discontinuation of Book-Entry Only System
DTC may determine to discontinue providing its services with respect to the Series 2017 Bonds at any time by giving notice to the Authority and the Trustee and discharging its responsibilities with respect thereto under applicable law. Upon the giving of such notice, the book-entry only system for the Series 2017 Bonds will be discontinued unless a successor securities depository is appointed by the Authority. In addition, the Authority may discontinue the book-entry only system for the Series 2017 Bonds at any time by giving reasonable notice to DTC. In the event that the book-entry only system for the Series 2017 Bonds is discontinued, the following provisions will apply, subject to the further conditions set forth in the Indenture: (i) principal of the Series 2017 Bonds will be payable upon surrender of the Series 2017 Bonds at the designated office of the Trustee; (ii) Series 2017 Bonds may be transferred or exchanged for other Series 2017 Bonds in denominations of $25,000 and integral multiples of $5,000 in excess thereof. The following provisions shall apply only upon discontinuance of the book-entry only system described above: (i) a physical certificate or certificates shall be executed, authenticated and delivered to each Beneficial Owner under the book-entry system in accordance with such Beneficial Owner's ownership interest; and (ii) such certificates shall be registered in the bond
8 register maintained by the Trustee. The Series 2017 Bonds shall be registered and may be transferred only on the bond register maintained by the Trustee. No transfer of the Series 2017 Bonds shall be permitted except upon presentation and surrender of such Series 2017 Bonds at the office of the Trustee. The holder of one or more of the Series 2017 Bonds may, upon request, and upon the surrender to the Trustee of such Series 2017 Bonds, exchange such Series 2017 Bonds for Series 2017 Bonds of other authorized denominations ($25,000 and integral multiples of $5,000 in excess thereof) of the same amount as the Series 2017 Bonds so surrendered. Any registration, transfer and exchange of Series 2017 Bonds shall be without expense to the holder thereof, except that the holder shall pay any expenses incurred in connection with the replacement of a mutilated, lost, stolen or destroyed Series 2017 Bond. The Authority shall not be required (i) to transfer or exchange any Series 2017 Bond during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Series 2017 Bonds and ending at the close of business on the day of such mailing, or (ii) to transfer or exchange any Series 2017 Bond so selected for redemption in whole or in part. Reference is made to the provisions of the Indenture in full for its provisions pertaining to the registration, transfer, exchange of Series 2017 Bonds and the method of payment of the principal of and interest thereon.
ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds are as follows:
______* Preliminary, subject to change. ** Funds from the Equity Contribution will be deposited into a separate account of the Project Fund (as hereinafter defined) under the Indenture, and used to pay certain costs of issuance of the Series 2017 Bonds, as well as the acquisition of a portion of the costs of equipment for the Project.
9 ANNUAL DEBT SERVICE REQUIREMENTS
The following table shows the annual debt service payable with respect to the Bonds for the years indicated:
Year Principal* Interest** Total 2018 $ - $ 312,075 $ 312,075 2019 - 328,500 328,500 2020 - 328,500 328,500 2021 195,000 328,500 523,500 2022 205,000 316,800 521,800 2023 220,000 304,500 524,500 2024 230,000 291,300 521,300 2025 245,000 277,500 522,500 2026 260,000 262,800 522,800 2027 275,000 247,200 522,200 2028 290,000 230,700 520,700 2029 310,000 213,300 523,300 2030 325,000 194,700 519,700 2031 345,000 175,200 520,200 2032 370,000 154,500 524,500 2033 390,000 132,300 522,300 2034 415,000 108,900 523,900 2035 440,000 84,000 524,000 2036 465,000 57,600 522,600 2037 495,000 29,700 524,700
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______* Preliminary, subject to change. ** Estimated, based on an assumed interest rate.
10 SECURITY FOR THE BONDS
Nature of the Authority’s Obligation The Bonds are limited obligations of the Authority payable solely from rental payments paid by the Company pursuant to the Lease Agreement (see “THE LEASE AGREEMENT” herein). The Bonds will constitute a valid claim of the registered owners thereof against the accounts established pursuant to, and the moneys held by the Trustee under the Indenture, which accounts and moneys are pledged and assigned for the equal and proportionate benefit of the registered owners of the Bonds and may be used for no purpose other than payment of the Bonds, except as otherwise authorized by the Indenture. The Indenture grants to the Trustee a mortgage on the real property comprising the Project and grants security interests in certain permits, contracts and the personal property financed with proceeds from the sale of the Bonds, all as described below. THE BONDS ARE NOT A DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF ALABAMA OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE TOWN OR THE AUTHORITY. NEITHER THE STATE OF ALABAMA NOR ANY POLITICAL SUBDIVISION OR AGENCY OF THE STATE OF ALABAMA, INCLUDING THE TOWN OR THE AUTHORITY SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF OR THE INTEREST ON THE BONDS OR OTHER COSTS INCIDENT THERETO, EXCEPT FROM PAYMENTS MADE BY THE COMPANY THAT ARE PLEDGED BY THE AUTHORITY TO THE PAYMENT THEREOF. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF STATE OF ALABAMA OR ANY POLITICAL SUBDIVISION OR AGENCY THEREOF, INCLUDING THE TOWN OR THE AUTHORITY IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE BONDS OR OTHER COSTS INCIDENT THERETO. THE AUTHORITY HAS NO TAXING POWER. Nature of the Company’s Obligation The Company’s obligation under the Lease Agreement with regard to the Bonds is not subordinated to any other outstanding debt of the Company on the date hereof. The Company’s obligation to make rental payments under the Lease Agreement is secured by a pledge of the revenues derived from the operation of the Project, and by grants of security interests in certain real property, permits, contracts and personal property financed with proceeds from the sale of the Bonds. The pledge of revenues in the Project described above (the “Pledged Revenues”) include all rents, receipts, issues and profits derived by the Company from the operation or ownership of the Project including, but not limited to, all receipts derived from the operation of the Project, such as disposal fees and all other moneys derived by the Company from the ownership or operation of the Project. The Indenture also grants to the Trustee a mortgage on the real property comprising the Project and grants security interests in certain permits, contracts and the personal property financed with proceeds from the sale of the Bonds. The following is a general description of the assets pledged pursuant to the Indenture, all of which secure the Company’s obligation to make rental payments under the Lease Agreement. Real Property. The Indenture constitutes a first mortgage on the real property comprising the Project Site and a security interest in the equipment and other personal property to be located
11 on the Project Site, together with certain buildings, improvements, waste disposal systems, equipment and fixtures now or hereafter located at or used in connection with the Project. Assignment of Permit. The Indenture includes an assignment of Solid Waste Disposal Facility Permit No. 17-10 (the “Permit”) issued by the Alabama Department of Environmental Management (“ADEM”). Assuming compliance with the regulatory, operational, environmental, reporting and other requirements contained therein, the Permit affords the Company the right to operate the Project as a nonhazardous solid waste disposal facility in accordance with the terms of the Permit and ADEM Administrative Code Division 335-13. Under applicable laws and regulations the Permit may be assigned to secure indebtedness; however, the transfer of the Permit to a successor owner or operator is subject to the approval of ADEM. Assignment of Waste Disposal Contracts. The Indenture includes an assignment of all waste disposal contracts which may arise and be executed between the Company and any waste producers and waste haulers disposing of waste material at the Project Site. See “THE PROJECT.”
THE COMPANY In General
The Company, a Georgia limited liability company, was formed for the sole purpose of operating the Project. The managing member of the Company is Stephen E. Witmer of Atlanta, Georgia (“Witmer”). Witmer is the sole member and managing member of CWI Enterprises, LLC, a Georgia limited liability company (“CWI”), which will oversee which will oversee and perform site construction and management of the Project .
Landfill Experience
Witmer and CWI began operations in the environmental and waste management sector in 1999 with the acquisition of the White Oaks Landfill in Monroe, Louisiana. After completing the purchase Witmer undertook a major permit modification and rapidly expanded market share. With the acquisition of Delta Disposal in 2004, CWI entered the waste hauling business. A second major permit modification was granted by the Louisiana Department of Environmental Quality in 2008, which brought the capacity to approximately 32 million cubic yards. By 2010, CWI had grown to over 50% market share in disposal and landfill revenue. Through long term contracts with the cities of Monroe and West Monroe, Franklin Parish, Caldwell Parish and others, CWI provided waste collection services to over 14,000 residential, commercial, and industrial customers, and employed over 30 individuals. White Oaks Landfill was the first landfill in Louisiana approved to accept exploration and production waste generated from the area’s oil and gas industry. CWI was able to grow its landfill and hauling revenues 15% and 10%, respectively, in 2009 during a severe economic downturn. CWI successfully sold the White Oaks Landfill and Delta Disposal to Waste Connections, Inc. (NYSE:WCN) in July 2010.
Additional Information In addition to CWI and his business in the environmental sector, Witmer has experience in energy exploration and production waste management (saltwater injection and solids
12 management), targeted oil and gas lease and royalty investments, and alternative fuel supply projects.
THE PROJECT
General
The Project is a nonhazardous solid waste disposal landfill located in Colbert County, Alabama, approximately twenty (20) miles northwest of the City of Muscle Shoals, Alabama.
The Project will provide nonhazardous solid waste disposal services for municipalities, private waste haulers, commercial entities, industrial waste producers and others. In the future, the Company may expand the scope of the Project to include the operation of a waste hauling service; however, such an enterprise is not contemplated for the immediate future and none of the proceeds of the Bonds are expected to be used for such purpose. The maps below show the general location of the Project:
The Project Site
The property comprising the Project presently consists of approximately 162 acres (the “Project Site”), 56.35 acres of which is currently permitted by ADEM to be used as disposal area. While the northern Alabama market area is highly industrialized and densely-populated, the area surrounding the Project Site is extremely remote and lightly inhabited. There are (6) incorporated cities in Colbert County, and the population of the County is 54,520, according to the U.S. Census Bureau. Approximately 70,000 people reside in the “Quad-cities” area of Sheffield, Muscle Shoals, Tuscumbia and Florence. Colbert County has an area of approximately 398,385 acres. It is approximately 45 miles from Decatur, Alabama, and 120 miles from Birmingham, Alabama. For further demographic and additional information on Colbert County and the market area, see The Sterner Report, as hereinafter defined and attached to this Official Statement as Appendix B.
13 Access and Transportation
Access to the Project Site is provided by U.S. Highway 72, the Natchez Trace Parkway, a number of other state and county roads and the Tennessee River, which provides water transportation from Knoxville, Tennessee, to the Gulf of Mexico. There are no ordinances or local regulations restricting truck traffic into or out of the Project Site.
The Permit
The Permit issued by the Alabama Department of Environmental Management (“ADEM”) allows the Company to utilize the Project Site as an Industrial Landfill in accordance with and subject to the provisions of the Solid Wastes & Recyclable Materials Management Act, as amended, Code of Alabama 1975, §§ 22-27-1 to 22-27-27 (“SWRMMA”), the Alabama Environmental Management Act, as amended, Code of Alabama 1975, §§ 22-22A-1 to 22-22A- 15, and rules and regulations adopted thereunder. Waste streams approved for disposal are nonhazardous industrial wastes, approved industrial sludges, construction and demolition wastes, rubbish as defined by ADEM Administrative Code Rule 335-13-1-.03, asbestos, and tires. See “BONDHOLDER RISKS – Environmental Risks and Regulations” herein. The Permit, as described below, was issued on September 24, 2015.
The Project is permitted by ADEM to accept up to a maximum average daily volume of 1,000 tons per day of C&D and industrial waste from a permitted service area comprising Colbert County in the State of Alabama. ADEM permit No. 17-10 (the “Permit”) will expire on September 23, 2020. Industrial landfill permits are issued by ADEM for five-year periods and, provided that permittees have exhibited regulatory compliance and submit a timely and complete permit renewal application to ADEM, are renewed for successive five-year periods. Upon expiration of the Permit, the Company expects that ADEM will renew the Permit for an additional five-year period and for successive five-year periods thereafter. Although there can be no assurance that ADEM will renew the Permit for successive periods, historically, waste companies demonstrating regulatory compliance are able to routinely renew their permits.
Permitted Waste Materials. The Permit allows for the disposal at the Project Site of nonhazardous industrial wastes, approved industrial sludges, construction and demolition wastes, rubbish, asbestos, and tires, as defined by ADEM and described below:
“Industrial Solid Waste” consists of “solid waste generated by manufacturing or industrial processes that is not a hazardous waste regulated under Chapters 22 to 30, inclusive, of Title 22, Code of Alabama 1975, and under the regulations promulgated thereunder.” [ADEM Admin. Code r. 335-13-1-.03(66).] “Solid Waste” is defined by ADEM as “any garbage, rubbish, construction or demolition debris, ash, or sludge from a waste treatment facility, water supply plant, or air pollution control facility, and any other discarded materials, including solid, liquid, semisolid, or contained gaseous material resulting from industrial, commercial, mining, or agricultural operations or community activities, or materials intended for or capable of recycling, but which have not been diverted or removed from the solid waste stream. The term ‘solid waste’
14 does not include recovered materials, solid or dissolved materials in domestic sewage, solid or dissolved material in irrigation return flows, or industrial discharges which are point sources subject to the National Pollutant Discharge Elimination System permits under the Federal Water Pollution Control Act, as amended, or the Alabama Waste Pollution Control Act, as amended; or source, special, nuclear, or by-product materials as defined by the Atomic Energy Act of 1954, as amended. Also excluded from this definition are land applications of crop residues, animal manure, and ash resulting exclusively from the combustion of wood during accepted agricultural operations, waste from silvicultural operations, or refuse as defined and regulated pursuant to the Alabama Surface Mining Act of 1969 (Article 1, Chapter 16, Title 9, Sections 9-16-1 to 9-16-15, Code of Alabama 1975). [ADEM Admin. Code r. 335-13-1-.03(126).]
“Sludge” consists of “any nonhazardous, solid, semi-solid, or liquid waste generated from a municipal, commercial, or industrial wastewater treatment plant, water supply treatment plant, or air pollution control facility exclusive of the treated effluent from a wastewater treatment plant.” [ADEM Admin. Code r. 335-13-1-.03(125).]
“Construction/Demolition Waste” consists of “waste building materials, packaging, and rubble resulting from construction, remodeling, repair, or demolition operations on houses, commercial buildings, and other structures. Such wastes include, but are not limited to, masonry materials, sheet rock, roofing waste, insulation (not including asbestos), scrap metal, and wood products. Uncontaminated concrete, soil, brick, waste asphalt paving, ash resulting from the combustion of untreated wood, rock and similar materials are excluded from this definition.” [ADEM Admin. Code r. 335-13-1-.03(28).]
“Rubbish” consists of “nonputrescible solid wastes, excluding ashes, consisting of both combustible and noncombustible wastes. Combustible rubbish includes paper, rags, cartons, wood, furniture, rubber, plastics, and similar materials. Noncombustible rubbish includes glass, crockery, metal cans, metal furniture and like materials which will not burn at ordinary incinerator temperatures, not less than 1600 degree F. Uncontaminated concrete, soil, brick, waste asphalt paving, ash resulting from the combustion of untreated wood, rock, yard trimmings, leaves, stumps, limbs and similar materials are excluded from this definition.” [ADEM Admin. Code r. 335-13-1-.03(115).].
Estimated Airspace and Useful Life of the Project Site
The Company’s engineers, CDG Engineering & Consulting, Inc., Andalusia, Alabama (“CDG”), have conducted a surface-to-surface examination of the Project Site in order to calculate the available disposal airspace within the metes, bounds and height of the permitted area within the Project Site and have determined that the Project Site contains approximately 2.5 million cubic yards of useable disposal airspace. Assuming industry norms for compaction, daily cover and cubic yards to tons conversion ratios, CDG estimates that the Project Site will accommodate the disposal of approximately 1.675 million tons of waste over its useful life without modification of the Permit. The Company plans to immediately file for a permit expansion and it is expected that the permitted airspace will expand to 10 million cubic yards or 6.7 million tons. No local approval is necessary
15 for the expansion and the Company anticipates that the approval will be completed by November 1, 2017.
At the currently permitted maximum volume levels of 1,000 tons per day, the Project Site would have a useful life of approximately 4.59 years. The estimate of useful life assumes 365 days of collection per year, and does not include the planned expansion or any other expansion of the Project Site, permitted service area or daily volume limits. It is highly unlikely that the Company would be able to maintain volume at the maximum permitted levels for the entire life of the Project Site, and the Company plans to operate at 260 days per year. Therefore, assuming no unforeseen geological, environmental, technological, legal, regulatory or commercial impediments to the area covered by the Permit, and assuming normal growth and expected waste volumes, as well as currently planned and expected permit modifications, CDG estimates that the useful life of the Project as a waste disposal site is in excess of 36 years.
The table below shows the current estimated disposal airspace at the Project Site, together with assumptions as to compaction and average working days per year. Using the foregoing information, the table shows the estimated useful life of the Project site under varying levels of average daily volume:
Estimated airspace (cubic yards) 10,000,000 Compaction ratio (cubic yards/tons) 0.67 Estimated airspace (tons) 6,700,000 Assumed number of operating days/year 260 Estimate d re maining life based on average Total airspace daily volume (TPD) as shown: TPD (years) 500 52 750 34 1,000 26 1,500 17 2,000 13 3,000 9 Total revenue-generating potential of the Landfill Site at $18.00 per ton ………. $ 120,600,000
16 The following graphic illustrates the increased airspace resulting from CDG’s redesign of the waste cells for the Project. This design makes more efficient use of the available 88 acre compliant footprint.
Coal Waste Disposal of waste from coal-fired power plants has become a significant issue in the United States and in industrialized countries around the world in recent years. There are a number of by- products and wastes created from coal-fired electric generation, however “fly ash” and “bottom ash” are the primary waste materials. As the name connotes, fly ash is the captured material which would have simply gone up a smokestack into the atmosphere prior to enactment of various clean air statutes and standards in recent decades. Bottom ash is the material removed from furnaces after combustion of coal in the generation process. On April 17, 2015, the U.S. Environmental Protection Agency released the final rule - Hazardous and Solid Waste Management System; Disposal of Coal Combustion Residuals (CCRs) from Electric Utilities - for the management and disposal of coal waste. The new rule establishes
17 minimum national criteria for purposes of determining which solid waste disposal facilities and solid waste management practices do not pose a reasonable probability of adverse effects on health or the environment. The rule applies to owners and operators of new and existing landfills and surface impoundments, including lateral expansions of such units that dispose or otherwise engage in solid waste management of waste materials generated from combustion of coal in electric power generation. According to the U.S. Department of Energy there are over 600 coal-fired power plants in the United States, 11 of which are located in Alabama. The two primary electric utilities operating in Alabama are Alabama Power Company (a subsidiary of Southern Company) (“Alabama Power”) and the Tennessee Valley Authority (“TVA”). These two utilities collectively own 34 coal-fired electric plants in the southeastern U.S. Significant environmental problems have occurred in recent years associated with the disposal of CCRs. Successful mandates to reduce air pollution have resulted in massive amounts of solid material that can possibly be a threat to groundwater. A major coal ash spill in December 2008 at TVA’s Kingston plant in Harriman, Tennessee, (among other recent spills) has focused regulators and power generators on the problems of CCRs, and has resulted in new regulations that will require the disposal of CCRs to take place in synthetically lined landfills such as the Project. Along with the permit expansion, the Company will also file an alternate liner design which will allow the Project site to be CCR compliant. This will enable the Company to pursue CCR disposal contracts. TVA’s Colbert Plant (“TVA Colbert”) is adjacent to the Project Site; TVA operated the coal burning plant until it was closed in 2014. The TVA Colbert facility has over 2.6 million tons of CCRs disposed in 150 acres of sluice ponds and impoundments. TVA Colbert will be demolished in 2018 and the CCR ponds and impoundments will be closed in place. Since CCRs are under such heavy and intense regulatory scrutiny and the burden and cost of monitoring the CCRs for over thirty years post-closure is high, the Company believes TVA Colbert may use the Project Site for remediation efforts when and if TVA is required to remove the CCRs from the TVA Colbert site. Because the Project Site is approximately three (3) miles from the closed TVA Colbert facility, the Company believes it has a competitive advantage to be engaged by TVA to remove both demolition debris and CCRs as part of TVA’s closure and removal activities. The Company expects to receive demolition waste from the closed TVA Colbert facility and expects to sell TVA excess fill dirt for the closure. The Company has been involved in discussions with TVA with respect to these opportunities; however, at present, the Company does not have a contract with TVA. The Company will aggressively seek contracts with TVA, other electric utilities and their various contractors and subcontractors for the disposal of CCRs at the Project Site. The Company believes that the location, geological considerations and absence of neighbors will make the Project a viable and cost-competitive disposal option for generators of CCRs. The Company’s forecast, however, does not include an assumption of any CCRs at the Project. Further, there can be no assurance that contracts for disposal of such material will be secured or maintained in the future.
18 Host Community and Royalties There is no host community agreement in place, nor is there a requirement for one. If the Company makes plans for any future expansion plans, including tonnage increases, it may offer a host fee to the Town, Colbert County or another municipality. Alabama law requires the Company to collect from generators and remit to the Alabama Department of Revenue a solid waste disposal fee equal to one dollar ($1.00) per ton or twenty- five cents ($0.25) per cubic yard of waste disposed of at the Project Site. Pursuant to the asset purchase agreement, the Company will pay the seller of the Project Site a royalty equal to $1.00 per ton of waste until a total of $3.5 million has been paid. Payment of this seller royalty will be subordinated to the payment of debt service on the Bonds. All royalties and taxes are reflected in the Company’s forecast, which is included herein. Project Site Development Plan Construction of waste cells on the Project Site will be completed in sequential phases. The first phase of the construction project will include an approximately ten (10)-acre waste cell along with a synthetic liner system, access roads, berms, leachate collection system, solidification basin (to allow acceptance of liquid waste materials) and a sedimentation pond which will service the entire Project Site for a number of years. The expected life of this cell is projected to be approximately three (3) years. The Company will begin construction of a second cell as the first cell nears capacity. Future cells will be funded by revenues generated by the Project or by other funds secured by the Company. There can be no assurance that the Company will be able to accumulate or otherwise secure funds for such additional cells. See “BONDHOLDER RISKS” herein. Cells will be constructed in accordance with, and the Permit requires conformance to the standards set forth in the Solid Wastes & Recyclable Materials Management Act, as amended, Code of Alabama 1975, §§ 22-27-1 to 22-27-27 (“SWRMMA”), and rules and regulations adopted thereunder, which regulate the handling, treatment, storage, transportation and disposal of nonhazardous solid wastes. SWRMMA codifies minimum criteria for the location, operation and design of nonhazardous solid waste disposal facilities, as well as establishing standards for site monitoring, corrective actions, closure and post-closure monitoring and financial assurance to insure funding necessary to complete closure, post-closure monitoring and, if necessary, corrective actions at these facilities. The Company will utilize a liner system consisting of two feet of soil with a hydraulic conductivity of 1x10-7 cm/sec or less, overlain by an 8 oz. non-woven geotextile filter fabric, a 12-inch sand drainage layer, and overlain by one foot of sand protective material with a hydraulic conductivity of 1x10-3 cm/sec or less. The Company will immediately engage CDG to obtain a Permit modification relating to the landfill design, significantly increasing the permitted landfill airspace from 2.5 million cubic yards to up to 10 million cubic yards. There is no local approval required for the landfill design modification, and the Company does not anticipate any obstacle to obtaining approval of this Permit modification from ADEM.
19 Simultaneous to the landfill design modification, the Company will also pursue approval from ADEM of an alternate liner system that will make the Project CCR-compliant. The Company believes this alternate liner system will give it a significant advantage in dealing with TVA and its legacy CCR issues, as well as with other utilities in the Project’s service area. CDG’s proposed alternate liner design of the Project Site calls for construction of lined cells to maximize airspace. The Company proposes to utilize an alternate composite liner system consisting of two feet of soil with a hydraulic conductivity of 1x10-7 cm/sec or less, overlain by textured 60 mil high density polyethylene (HDPE) geomembrane, overlain by a double sided HDPE drainage net/filter fabric geocomposite, and overlain by one foot of sand protective material with a hydraulic conductivity of 1x10-3 cm/sec or less. The proposed design calls for the use of spray-on, polymer-based materials, or reusable geosynthetic cover as an alternate daily cover. The Project will feature one (1) working face. All waste shall be confined to an area as small as possible and spread to a depth not exceeding two (2) feet prior to compaction, and such compaction shall be accomplished on face slopes not to exceed a ratio of 3:1. The Project design and development plan also includes the acquisition by lease of real property and improvements in Madison, Alabama, and the purchase of a minor amount of equipment to be used as a transfer station (the “Transfer Station”). The Transfer Station is located approximately 65 miles from the Project, and is expected to produce, through agreements with five local haulers, approximately 250 tons per day of volume for ultimate delivery to the Project. It is expected (by both the Company and by Sterner Consulting) that the capital investment in the Transfer Station will be minimal (approximately $200,000 to $400,000) and will be paid for from the Equity Contribution. The Company may or may not renew the lease for subsequent five-year periods for the Transfer Station in the future if, for instance, it is successful in attracting contract(s) for the disposal of CCRs. Competition Competing Landfills. There is one (1) permitted landfill in Colbert County, with no other permit applications for Colbert County in process at ADEM. There are for (4) primary landfills that the Company will face competition with: Colbert County and Morris Farms (Republic Services) will compete with the Project for direct landfill waste, and City of Huntsville’s C&D landfill and the Decatur/Morgan County landfill will compete with the Project for waste volume accepted at the Greenbrier Transfer Station. The following information relates to the facilities which the Company considers to be its primary competitors for C&D and Industrial waste disposal within its anticipated primary market area (after Permit modification) of Colbert, Lauderdale, Limestone, Lawrence, Morgan, and Madison counties. The Company also expects to compete for waste in northeast Mississippi and south central Tennessee. The Company expects to penetrate the City of Huntsville and Decatur/Morgan County landfill markets by approximately 33%. The Company expects to penetrate the Morris Farms and Colbert County landfill markets by 6%, and an overall market penetration of 11%. Morris Farms. Owned and operated by a wholly-owned subsidiary of Republic Services, Inc., Phoenix, Arizona (NYSE: RSG) (“Republic”), the Morris Farms Landfill is
20 located at 3345 County Road 209 in Morgan County, approximately 40 miles from the Project. This site is permitted by ADEM to accept up to 1,500* tons per day (TPD) and, according to ADEM filings, 2016 average volume was approximately 656 TPD, based on 365 days per year. Including governmental fees, the posted tipping fees at the Morris Farms Landfill are $46.00 per ton for all waste. Colbert County. This landfill is owned and operated by the Shoals Solid Waste Authority. The facility is located at 2205 County Road 6 in the Cherokee County city of Piedmont, approximately 20 miles from the Project. This landfill is permitted by ADEM to accept up to 1,000* TPD and, according to ADEM filings, 2016 average volume was approximately 601* TPD, based on 365 days per year. Including governmental fees, the posted tipping fees at the Colbert County Landfill are $16.00 per ton for construction demolition and industrial waste. Morgan County Regional Landfill. This landfill is owned and operated by Morgan County, Alabama. This site is located at 1319 North Business Creek Road near Ragland in Morgan County, approximately 44 miles from the Project and is permitted by ADEM to accept up to 1500* TPD. According to ADEM filings, 2016 average volume was approximately 504* TPD, based on 365 days per year. Including governmental fees, the posted tipping fees at the Decatur/Morgan County Landfill are $28.00 per ton for municipal solid waste (“MSW”). City of Huntsville. This landfill is owned and operated by the Solid Waste Disposal Authority of the City of Huntsville. The site is located at 3301 Acmar Road in the Madison County, approximately 70 miles from the Project and is permitted by ADEM to accept up to 750* TPD. According to ADEM filings, 2016 average volume was approximately 414* TPD, based on 365 days per year. Including governmental fees, the posted tipping fees at the Huntsville C&D Landfill are $27.90 per ton for construction and demolition waste. ______* It is important to note that daily volume in the solid waste industry is typically quoted in terms of an average year with 260 working days, while ADEM volume reports call for a calculation based on a year of 365 days. Unless otherwise noted, all references to daily volume in this Official Statement are stated using a year consisting of 260 working days.
Other Alabama Landfills. In addition to the Project and the foregoing sites, there are 27 other MSW landfills and a number of transfer stations in Alabama. These range from very small rural facilities with very limited daily volume limits and small, single-county geographic service areas, to large regional facilities with statewide or multi-state permitted service areas. See also “BONDHOLDER RISKS – Competition” herein.
21 Local Market Data
The following table shows each landfill currently permitted in the Company’s anticipated primary market area (after Permit modification), the county in which it is located, the types of waste accepted at each facility, the permitted service area and the 2016 average daily volume (expressed in tons per day, using a 260-day year) for each facility, all as reported by ADEM. The Company is able to accept all of the waste materials accepted at these sites.
MAX 2016 C&D LANDFILLS PERMIT VOLUME VOLUME MILES FROM WITHIN 50 MILES NUMBER OWNER SERVICE AREA WASTE TYPE (tpd) (tons) PROJECT
PF Industrial Enterprises 17-10 CWI Continental 48 US States C&D 1000n/an/a
Huntstville MSWLF 45-01 City of Huntsville Madis on County, AL C&D 750 151,131 70
Decatur-Morgan County Sanitary Landfill 52-03 Morgan County/City of Decatur NW AL and 6 TN counties MSW, C&D 1,500 184,005 56
Shoals Solid Waste Authority Industrial 17-01 Shoals Solid Waste Authority Colbert County, AL and Barton Industrial Park C&D, Industrial 1,000 219,576 20 Landfill
Colbert, Franklin, Lauderdale, Lawrence, Limestone, Morris Farm Landfill 40-08 Republic MSW, C&D 1,500 239,456 40 Madison, Morgan
Underwood Industrial Landfill 39-03 County Lauderdale County, Alabama C&D 100 8,878 40
City of Florence Sanitary Landfill 39-05 City of Florence City of Florence, AL and Lauderdale County C&D 250 16,919 40
State of Alabama; Alcorn and Tishimingo Counties Franklin County Land Franklin County Land Management, Inc. 30-04 in Mississippi; Hardin, Itawamba, Lawrence and C&D 250 10,385 30 Management, Inc. Wayne Counties in Tennessee
Franklin County Solid Waste Disposal 30-05 County Franklin County in Alabama C&D 500 4,447 20 Facility
Franklin County, AL. Tishomingo County, MS and Red Bay Landfill 30-06 City of Red Bay C&D 100 4,494 30 Itawamba, MS
Madison County District 1 Landfill 45-08 Madison County Madison County C&D 200 42,898 70
City of Hunstville Steam Plant n/a City of Huns tville Steam Plant Madison County MSW, C&D n/a 167,474 n/a
ESTIMATED TOTAL C&D MARKET 1,049,663 tons per year
Environmental and Site Considerations
The Company has performed extensive testing, review, research and analysis of the Project Site to satisfy all requirements of local, state and federal regulators with respect to environmental and regulatory conformance and compliance. A variety of assessments, including a Wetlands Delineation, Endangered Species Assessment, Archaeological Assessment Survey, Phase I Cultural Resource Survey, and a number of groundwater and geotechnical studies (the “Environmental Reports”) with respect to the Project Site have been performed for the Company by a number of engineering firms, primary among which has been CDG.
22 The scope of work performed in connection with the Environmental Reports included site reconnaissance, geological sampling/testing, interviews, survey of adjacent property, review of environmental databases, follow-up with applicable regulatory agencies and review of aerial photographs. CDG made no recommendations for further environmental investigation and revealed no other evidence of recognized environmental, cultural, historical or archaeological conditions that would impact the Project Site’s use for its purpose as a nonhazardous solid waste disposal site.
Summary of the Company’s Forecast
General Statement. The Company’s forecasts and estimates are based upon current regulations, contract provisions and expected market and operating conditions. No assurances can be given that changes in regulations or market and operating conditions will not occur. Any adverse changes in regulations or market and operating conditions may have a material adverse effect on the Company’s estimates. In addition, certain assumptions made by the Company may not materialize, and unanticipated events and circumstances may occur subsequent to the date of these estimates. The actual results achieved, therefore, during the projected periods may vary from the estimates.
Forecast of Volume and Airspace Depletion. A summary of the Project’s estimated future volume and depletion of airspace prepared by the Company, for the years ending December 31 in the years shown, is presented below:
2018 - 2022 Volume/airspace calculations 2018 2019 2020 2021 2022
Estimated volume (average tons per day): 350 355 450 458 716
CD/Industrial Local (market price) 100 105 150 158 416 CD/Industrial (Transfer Station) - 3 to 5 haulers 250 250 300 300 300
Operating days 260 260 260 260 260 Total volume (tons) 91,000 92,300 117,065 119,018 186,160
Estimated airspace at end of period (cubic yards): Estimated airspace depleted (cubic yards) 130,000 131,857 167,236 170,026 265,943 Airspace remaining (cubic yards) 9,870,000 9,738,143 9,570,907 9,400,881 9,134,938 Airspace remaining 99% 97% 96% 94% 91%
23 Forecast of Operations. A summary of the Project’s estimated future revenues and expenses prepared by the Company, for the years ending December 31 in the years shown, is presented below.
2018 - 2022 Operating forecast 2018 2019 2020 2021 2022
Revenue: Gross disposal income $ 2,288,000 $ 3,936,400 $ 2,887,170 $ 2,922,329 $ 3,914,560 (Less) royalties/governmental fees (182,000) (184,600) (234,130) (238,037) (372,320) NET REVENUE $ 2,106,000 $ 3,751,800 $ 2,653,040 $ 2,684,292 $ 3,542,240
Operating expense: Landfill operations - labor 137,592 141,720 145,971 150,350 154,861 Landfill operations - fuel/other 115,700 119,171 122,746 126,429 130,221 Maintenance labor and costs 109,742 113,034 116,425 119,918 123,515 Insurance 59,583 61,371 63,212 65,108 67,062 Leachate disposal 37,917 39,054 40,226 41,433 42,676 Professional fees 22,569 23,247 23,944 24,662 25,402 General and administrative 197,911 203,849 209,964 216,263 222,751 Transfer Station 910,000 910,000 1,092,000 1,092,000 1,092,000 TOTAL OPERATING EXPENSES $ 1,591,015 $ 1,611,445 $ 1,814,488 $ 1,836,163 $ 1,858,488
EBITDAM $ 514,985 $ 2,140,355 $ 838,552 $ 848,129 $ 1,683,752 EBITDAM % OF REVENUES 24% 57% 32% 32% 48% MAXIMUM ANNUAL DEBT SERVICE $ - $ 524,700 $ 524,700 $ 524,700 $ 524,700 DEBT SERVICE COVERAGE n/a 4.08 1.60 1.62 3.21
Interest expense 24,300 18,900 343,500 328,394 303,582 Subordinated Management Fees 120,000 120,000 120,000 120,000 120,000
EARNINGS BEFORE NON-CASH EXPENSES $ 370,685 $ 2,001,455 $ 375,052 $ 399,735 $ 1,260,170
Amortization of financing costs 26,350 26,350 26,350 26,350 26,350 Depreciation and amortization - fixed assets 455,839 530,134 535,994 737,419 358,860
PreTax Net Income $ (111,504) $ 1,444,971 $ (187,292) $ (364,034) $ 874,960
Estimate of Value and Developmental Review
A Developmental Review of the Project prepared by Sterner Consulting, Pittsburgh, Pennsylvania (the “Sterner Report”), is included herewith as Appendix B, with the consent of Sterner Consulting and in reliance upon Sterner Consulting’s expertise in solid waste facility matters. The Sterner Report should be read in its entirety. As noted in the Sterner Report, Sterner Consulting is of the opinion that the underlying assumptions presented in the report provide a reasonable basis for the projections in the report. However, any projection is subject to uncertainty. There will usually be differences between actual and projected results because events and the circumstances that surround them do not always occur as expected and such differences can be material. The Company believes the difference in its projected operating results (first five years) versus those represented in the Sterner Report are in large part due to Sterner Consulting’s assumption of a faster penetration of a particular sludge account, reflecting 20,000 tons per year in years 2-4, whereas the Company does not budget any
24 volume from such customer until year 5. The difference accounts for almost two-thirds of the difference in projected operating results between the Company and Sterner Consulting, and is due to Sterner’s assumption that, because of this particular customer’s proximity to the Project, the Company will begin collecting a greater volume of sludge much sooner than the assumptions used in the Company’s forecasts. After year 5, both the Company and Sterner project the same amount of volume from this customer. Another difference is a result of Sterner assuming 26 added operating days per year (286 vs. 260), by adding half days on Saturdays. Among other information, the Sterner Report contains estimates of the Project’s value under a number of valuation methods, and contains evaluations of the Company’s market area and financial forecast.
FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
Some of the statements contained in this Official Statement constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or future financial performance, and are identified by terminology such as “may,” “will,” “could,” “should,” “expects,” “plans,” “intends,” “seeks,” “anticipates,” “believes,” “estimates,” “potential,” or “continue” or the negative of such terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on these forward-looking statements. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined under “BONDHOLDER RISKS.” These factors may cause its actual results to differ materially from any forward-looking statement.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Subject to any obligation that the Company may have to amend or supplement this Official Statement as required by law and the rules of the Securities and Exchange Commission, neither the Company nor any member or officer thereof is under any duty to update any of the forward-looking statements after the date of this Official Statement to conform these statements to actual results.
This Official Statement contains estimates of the size of the solid waste market and market growth. These estimates have been included in studies published by market research and other firms. These estimates have been produced by industry analysts based on trends to date, their knowledge of markets, and customer research, but these are forecasts only and are subject to inherent uncertainty.
25 BONDHOLDER RISKS
Prospective investors should carefully consider the following risk factors, in addition to the other information appearing elsewhere in or incorporated by reference in this Official Statement, prior to making an investment decision relating to the securities offered by this Official Statement.
The financial success of the Project depends, in part, on the financial viability of the Company. Many of the Bondholders’ risks set forth below relate to general business risks associated with the Company, and not necessarily with the Project itself.
Lack of Operating History; Losses During Startup Period
The Company is a recently formed entity. While its chief executive has substantial experience in the waste management business, the Company has no operating history. The Company has not achieved profitability and there can be no assurances made that profitability will be achieved in the future. To date, the Company has funded its operations from cash invested by its members. The Company expects to continue to incur significant acquisition, selling and marketing, and general and administrative expenses and, as a result, the Company will need to generate significantly higher revenues in future periods to achieve and maintain profitability. The Company cannot be certain that it can sustain growth rates or that it will achieve sufficient revenues for profitability. If the Company does achieve profitability, the Company cannot be certain that it can sustain or increase profitability in the future.
No Assurance of Successful Implementation of Business Strategy
The Company has a limited operating history in the operation of solid waste facilities, and there are no assurances that this business ultimately will be successful. The Company is subject to all of the risks inherent in the establishment and growth of developing businesses, including, among other things, limited access to capital, delays in the completion of its business plans in certain markets and intense competition.
Need for Additional Financing; No Assurance of Available Financing
The operation of the Project and the potential future acquisition of existing, permitted facilities requires significant capital and other resources. The inability of the Company to finance its capital needs could adversely affect future plans of the Company. The Company currently intends to raise additional capital through debt and/or equity financing, the proceeds of which would be devoted to completing acquisitions, but as the Company continues its growth, management will consider all financing alternatives that may become available. There can be no assurance that such financing will be available on terms and conditions acceptable to the Company, and interest and other costs associated with such financing may have an adverse impact on the profitability of the Company. Thus, there can be no assurance that the Company can successfully
26 obtain such financing or pursue its strategies and failure to do so may limit the growth potential of the Company.
Transfer Station
As discussed hereinabove, the realization of the Company’s forecasted operating results are, to an extent, a product of the completion of the Transfer Station. Although the Company believes it has the funds with which to develop the Transfer Station, there is no guarantee that the Transfer Station will be successfully completed and opened, nor that the anticipated volumes of waste will be delivered to the Transfer Station, or at currently predicted volumes and rates.
Competition - General
The Company operates within the intensely competitive waste disposal industry. The Company will face competition from national waste disposal companies and regional and local entities of various sizes and competitive resources and will in the future be confronted with such competition in each location where it intends to expand. Some of these competitors are larger and have substantially greater financial and other resources than the Company and may be well entrenched in their respective markets. The Company will also compete with municipalities which maintain their own waste collection and/or disposal operations. These municipalities may have financial advantages through their access to tax revenue and their ability to mandate the disposal of waste collected within the jurisdiction at the municipal facility. Competition may also be affected by a national emphasis on recycling, composting, incineration and other waste reduction programs which could reduce the volume of waste deposited in landfills. In pursuing its business strategies of acquiring operations and facilities in the waste management industry, the Company competes for such acquisitions and management contracts with large, national companies and with regional and local companies, many of which have significantly greater financial resources and more established market positions than the Company. The trend toward consolidation in the waste management industry has increased competition for the acquisition of existing, permitted disposal facilities. There can be no assurance that additional facilities will be available for acquisition on terms the Company deems attractive.
Competition – The Project
As discussed hereinabove under the heading “THE PROJECT – Competition,” the Project competes with other landfills and other solid waste operations in its service area. It is impossible to predict what effects the pricing, marketing and operational tactics and strategies of the Project’s competitors will have on the future profitability of the Project and the Company.
Environmental Risks and Regulations
The Company (and therefore the Project) is subject to extensive and evolving environmental laws and regulations. These regulations are administered by the U.S. Environmental Protection Agency (the “EPA”) and various other federal, state and local environmental, zoning,
27 health and safety agencies, many of which periodically examine the Company’s operations to monitor compliance with such laws and regulations. Management of the Company believes there will be continued change in regulation and legislation related to the waste management industry, and the Company will attempt to anticipate such future regulatory requirements to ensure compliance.
The Company’s operation of landfills and other collection and processing facilities subjects it to operational, monitoring, site maintenance, closure and post-closure obligations which could give rise to increased costs for monitoring and corrective measures. Governmental authorities have the power to enforce compliance with these regulations and to obtain injunctions or impose civil or criminal penalties in case of violations. The Project Site has never been subjected to fines nor has it been closed, temporarily or permanently, by regulatory authorities. In connection with the Company’s acquisition of existing facilities, it may also be necessary to expend considerable time, effort and money to renew and maintain existing permits and to obtain permits required to increase the capacity of these facilities.
The Company’s operations are subject to regulation, principally under the following federal statutes, along with analogous state statutes: The Resource Conservation and Recovery Act of 1976 (“RCRA”). RCRA regulates the handling, treatment, storage, transportation and disposal of certain hazardous and nonhazardous wastes. The EPA’s regulations under Subtitle D of RCRA generally became effective on October 9, 1993, and affect both existing and new solid waste facilities. Subtitle D codifies minimum criteria for the location, design and operation of solid waste facilities, as well as establishing standards for monitoring, corrective actions, closure and post-closure monitoring and financial assurance to insure funding necessary to complete closure, post-closure monitoring and, if necessary, corrective actions at these facilities. Under Subtitle D, states with EPA approval issue permits to implement and enforce EPA and state nonhazardous solid waste disposal regulations. In connection with the permitting process, a facility may be required to demonstrate that it will satisfy various other requirements, including those relating to the protection of endangered species. Regulated facilities that do not meet the requirements of the Subtitle D regulations may be required to close. Many facilities reportedly have closed in recent years because they were unable to meet those regulatory requirements. All of the Company’s planned facility expansions, including the Project, or new solid waste development projects are being engineered to meet or exceed Subtitle D regulatory requirements whenever such requirements are in effect for a given facility. The Federal Water Pollution Control Act of 1972 (“Clean Water Act”). The Clean Water Act established rules regulating the discharge of pollutants into waters of the United States from a variety of sources, potentially including waste disposal sites. For example, if leachate, storm water runoff, or other wastewater from the Company’s disposal facilities may be discharged into surface waters, the Clean Water Act would, in many instances, require the Company to obtain discharge permits, conduct periodic sampling and monitoring and, under certain circumstances, reduce the quantity of pollutants in those discharges. Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“Superfund” or “CERCLA”). CERCLA addresses the release or threatened release of hazardous
28 substances into the environment. CERCLA can impose retroactive, strict, joint and several liability on the present or former owners or operators of facilities that release hazardous substances into the environment. Waste generators and transporters also can be strictly liable. These persons may be liable for site investigation costs, site cleanup costs and natural resource damages, even if the original conduct giving rise to liability was in compliance with all then-existing laws and regulations. The costs of a CERCLA cleanup can be substantial. Liability under CERCLA is not dependent upon the existence or disposal of “hazardous wastes” and many of the sites on the EPA National Priorities List of Superfund sites are municipal solid waste disposal facilities. There can be no assurance that the Company will not face claims resulting in liability under CERCLA. The Company may attempt to grow, in part by acquiring existing disposal businesses operated in the past by others. The Company conducts due diligence with respect to disposal facilities that they might acquire or contract to manage to determine whether such contain or have handled hazardous substances. There can be no assurance that the Company will be effective at detection or will prove effective or that the Project will not have other unknown environmental problems and related liabilities. Virtually all of the states have Superfund programs similar to CERCLA that give rise to the obligations and liability concerns discussed above. The Clean Air Act. The Clean Air Act provides for federal, state and local regulation of emissions of air pollutants into the atmosphere. Programs established under certain Clean Air Act amendments, will likely subject solid waste disposal facilities to new reporting and operational requirements and, in some instances, require installation of methane gas recovery systems. Other State and Local Legislation. Alabama and other states in which the Company may operate in the future have laws and regulations governing waste disposal and air pollution and, in most cases, regulations governing the design, operation, maintenance and closure of waste management facilities. Subtitle D allows states to implement their own regulatory programs if those programs meet federal standards. The full effect of this may not be apparent for years as states establish their own regulatory schemes. In addition to costly and restrictive regulation, there are a number of other factors, the long- term effects of which are unpredictable, which could result in higher disposal facility operating costs and possible decreased demand for disposal facilities. These factors include not only the increasing public opposition to the siting and operation of disposal facilities, but also increased efforts (including legislation) to reduce the volume of waste and the dependence on landfilling for disposal by promoting waste minimization, incineration, composting, waste-to-energy and recycling. Several states have enacted laws that will require counties to adopt comprehensive plans to reduce, through waste planning, composting and recycling or other programs, the volume of solid waste deposited in landfills within the next few years. A number of states have taken or propose to take steps to ban the landfilling of certain wastes, such as yard wastes, beverage containers, newspapers, unshredded tires, lead-acid batteries and household appliances. To date, Alabama has not taken any such steps but there can be no assurance that it will not in the future. Legislative Initiatives. The continuing public awareness and interest in solid waste disposal, the siting of waste facilities, and the protection of the environment frequently lead to federal, state and local legislative initiatives that could affect the Company’s operations. The prospects for any legislative proposal are inherently uncertain, and the Company cannot accurately predict how its business may be affected by the adoption of new laws.
29 In recent years, some states and localities have instituted waste “flow control” requirements, under which specified solid waste collected in a jurisdiction is required to be delivered to a governmentally-designated facility. In response to some of those enactments, the United States Supreme Court and several lower federal courts have ruled that certain flow control ordinances violated the Interstate Commerce Clause of the U.S. Constitution. The U.S. Constitution grants the Congress the power to authorize certain otherwise unconstitutional state and local actions affecting interstate commerce, and Congress has been considering legislation that would exempt some or all flow control requirements from Constitutional invalidity. Some states have also adopted or considered legislation to ban, restrict or impose special taxes on waste imported from outside the state. The U.S. Supreme Court has struck down some such measures as unconstitutional discrimination against interstate commerce, as have several lower federal courts. In response to these court decisions, bills have been introduced in Congress in the past several years to enable states to ban, restrict or differentially tax out-of-state waste. The Company cannot predict whether Congress will pass legislation permitting flow control or restrictions on the interstate movement of waste, or the content of any such bills that may ultimately become law.
Operating Risks and Possible Insufficiency of Insurance
The business of the Company exposes it to various risks, including claims for damage to property, injuries to persons, negligence and professional errors or omissions in the planning or performing of their services and providing of their products, which claims could be substantial. The Company maintains general liability, automobile liability and excess liability insurance coverage on all of its operations. Under the Company’s insurance policies there are various exclusions which management of the Company believes to be customary in the industry. Accordingly, there can be no assurance that liabilities which may be incurred by the Company will be covered by its insurance or that the amount of such liabilities will not exceed the Company’s policy limits.
Environmental Impairment Liability
The Company is subject to potential liability for any environmental damage its facilities may cause, particularly as a result of the contamination of water or soil. Accordingly, there can be no assurance that the Company will have funds available to pay for any such environmental damage or that liabilities which may be incurred by the Company will be covered by insurance or that the dollar amount of such liabilities will not exceed the Company’s policy limits.
Cash Flow and Liquidity Constraints
The Company has significant demands on its cash resources for general corporate requirements and growth opportunities. Over the long term, management of the Company believes that additional cash flow and liquidity might be gained through additional project financing and the acquisition of additional businesses by issuing common stock or debt. If the Company were
30 unable to complete any such debt or equity financing, it could have a material adverse impact on liquidity.
Future Facility Costs and Commitments
In the future, the Company will also have material financial obligations relating to closure and post-closure costs for disposal facilities they own or operate, including the Project, the precise amount of which cannot be determined. The Company will provide accruals based on engineering estimates, as disposal cells are filled. The estimate of the total future liability is subject to change as it is based on current economic conditions, operational results, existing regulations and a combination of internal and external engineering specifications which may not yet have been approved by the appropriate regulatory authorities. In addition, the Company may be required from time to time to obtain financial assurance security for performance, closure and post-closure obligations, a portion of which may be funded with cash deposits or other collateral.
Dependence on Executive Officers
The Company has no operating history in the solid waste business. However, certain Company personnel have experience in the solid waste business and related industries. The development of the Company’s business is dependent upon the efforts and talents of its key personnel, in particular Witmer. Loss of the services of one or more of such persons could adversely affect Company operations.
Permitting
The future development of the Project depends upon the renewal of the Permit (and potential future modifications of the Permit). In addition, the Company may seek to acquire permits from governmental entities in order to expand its business in the future (see “THE PROJECT – Permit” herein). While there is no reason to believe that the Company will not obtain and/or renew such permits (or permit modifications) so long as it remains in compliance with various regulatory requirements, there is no assurance that the Company will be able to obtain and/or renew such permits (or permit modifications) in the future. Litigation
Solid waste companies such as the Company are, by the nature of their business, from time to time subject to litigation. Neither the Company nor any of its members, officers or directors are currently defendants in any lawsuits. The Company cannot predict with any certainty the extent to which it might be involved in litigation in the future, nor can it predict the outcome of any litigation, if commenced.
Security Limitations
The Bonds are payable from the Pledged Revenues, from a mortgage on the Project Site, from interest earnings on funds established in the Indenture, from certain net proceeds of insurance
31 policies and from general funds of the Company. See “THE BONDS - Source of Payment and Security for the Bonds” herein. There is no assurance that such sources shall continue or be sufficient to meet required debt service payments. Because of certain deed restrictions described herein, it will not be possible to convert the Project Site to an alternative use. Because of the configuration and contemplated use of the Project, it may not be possible for the Project to be sold as a going concern. If the Project could not be sold as a going concern, it is likely that sales proceeds would be insufficient to pay the Bonds. There is no assurance that a buyer or buyers for the Project other than an operator of solid waste facilities could be obtained within any particular time.
Limited Marketability of the Bonds
There is a limited market for the Bonds and there is no assurance that the Underwriter and/or other brokers or dealers of securities will maintain a secondary market for the Bonds. Accordingly, an investment in the Bonds may be illiquid and purchasers thereof may have to hold them for an indefinite period of time.
Additional Obligations of the Company
In the course of business it is expected that the Company will, subject to certain limitation set forth in the Lease Agreement, incur obligations under financial instruments other than the Bonds, including notes, leases, or other evidences of indebtedness.
Enforceability of Certain Contracts
The Company expects that a portion of the waste delivered to the Project Site for disposal, and therefore a portion of its revenues, will be derived pursuant to contracts between the Company and a number of corporate and governmental entities in the Project’s designated market area. These contracts would typically allow such entities to fulfill their obligations by delivering their waste to the Project and paying the Company for the disposal thereof. A successful challenge to one or more such disposal contract could have a significant materially adverse impact on the revenues of the Company.
Tax-Exempt Status of Bonds It is expected that the Bonds will qualify as tax-exempt obligations for federal income tax purposes as of the date of issuance. See “TAX EXEMPTION”. It is anticipated that Bond Counsel will render an opinion substantially in the form attached hereto as Appendix A, which should be read in its entirety for a complete understanding of the scope of the opinions and the conclusions expressed therein. A legal opinion expresses the professional judgment of the attorney rendering the opinion as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.
32 The tax status of the Bonds could be affected by post-issuance events. There are various requirements of the Internal Revenue Code of 1986, as amended, that must be observed or satisfied after the issuance of the Bonds in order for the Bonds to qualify for, and retain, tax-exempt status. These requirements include appropriate use of the proceeds of the Bonds, use of the facilities financed by the Bonds, investment of bond proceeds, and the rebate of so-called excess arbitrage earnings. Compliance with these requirements is the responsibility of the Authority and the Company. The Internal Revenue Service conducts an audit program to examine compliance with the requirements regarding tax-exempt status. Under current IRS procedures, in the initial stages of an audit with respect to the Bonds, the Authority would be treated as the taxpayer, and the owners of the Bonds may have limited rights to participate in the audit process. The initiation of an audit with respect to the Bonds could adversely affect the market value and liquidity of the Bonds, even though no final determination about the tax-exempt status has been made. If an audit results in a final determination that the Bonds do not qualify as tax-exempt obligations, such a determination could be retroactive in effect to the date of issuance of the Bonds. In addition to post-issuance compliance, a change in law after the date of issuance of the Bonds could affect the tax-exempt status of the Bonds or the effect of investing in the Bonds. For example, the United States Congress could eliminate or limit the exemption for interest on the Bonds, or it could reduce or eliminate the federal income tax, or it could adopt a so-called flat tax. It cannot be predicted whether or in what form any such change in law may be enacted or whether, if enacted, any such change in law would apply to the Bonds. The Indenture does not require the Authority to redeem the Bonds and does not provide for the payment of any additional interest or penalty if a determination is made that the Bonds do not comply with the existing requirements of the Internal Revenue Code of 1986, as amended, or if a subsequent change in law adversely affects the tax-exempt status of the Bonds or the effect of investing in the Bonds. Sterner Report The Sterner Report, prepared by Sterner Consulting, Pittsburgh, Pennsylvania, included as Appendix B to this Official Statement, contains certain assumptions and forecasts. Actual results are likely to differ, perhaps materially, from those forecasts. Accordingly, the forecasts contained in the Sterner Report are not necessarily indicative of future performance, and none of the Underwriter, Sterner Consulting, the Company, or the Authority assumes any responsibility for the failure to meet such forecasts. In addition, certain assumptions with respect to future business and financing decisions of the Company are subject to change. If actual results are less favorable than the results forecasted in the Sterner Report, or if the assumptions used in preparing such forecasts prove to be incorrect, the amount of the Company’s revenues may be materially less than expected and, consequently, the ability to make timely payments of the principal of and interest on the Bonds from the Company’s revenues may be materially adversely affected. See “Appendix B – Value Estimation and Review of the Project”.
33 THE INDENTURE
The following, in addition to information provided elsewhere in this Official Statement, summarizes certain provisions of the Indenture, to which document reference is made for the detailed provisions thereof.
Pledge and Security
Pursuant to the Indenture, the Lease Agreement, together with all of the Authority’s interest therein (except for certain of the Authority's rights to be indemnified and to be reimbursed for its expenses), and all revenues and receipts payable to the Authority under or with respect to the Lease Agreement (except for certain of the Authority’s rights to be indemnified and to be reimbursed for its expenses) are assigned and pledged to the Trustee to secure the payment of the Bonds. To the extent provided in the Indenture, the Trustee will have a prior claim on certain amounts for the payment of its reasonable fees and expenses and for the repayment of advances made by it to effect performance of certain covenants in the Indenture.
Additionally, the Indenture will grant a first mortgage on the real property comprising the Project Site and the Improvements and a security interest in the Permit, any and all waste disposal contracts which may be entered into and the equipment and personal property purchased with the proceeds from the sale of the Bonds.
Application of Proceeds
The net proceeds from the sale of the Bonds will be deposited by the Authority with the Trustee and paid by the Trustee to the Company to provide for the financing of the Project.
Funds and Accounts
The Indenture establishes the following funds and accounts which are to be maintained by the Trustee:
Bond Fund. The Bond Fund, consisting of a 2017 Interest Account and a 2017 Principal Account, will be used solely for the payment of the principal of, premium if any, and interest on the Bonds. The following shall be deposited into the Bond Fund: (i) accrued interest, if any, on the Bonds to the date of their delivery, (ii) the amounts paid by the Company under the Lease Agreement in respect of the payment of principal of, premium, if any, and interest on the Bonds and (iii) certain other amounts specified in the Indenture. All moneys required to be paid to the Trustee for the account of the Bond Fund are to be held by the Trustee in trust and, except for moneys held for the redemption of particular Bonds, are part of the trust estate and are subject to the lien on the Indenture.
Project Fund. The Project Fund will consist of two accounts: (i) a “Series 2017 Bond Proceeds Account” into which funds representing acquisition, construction, rehabilitiation,
34 equipment, and development costs of the Project to be paid from the proceeds of the sale of the Bonds will be deposited. There shall be deposited into the series 2017 Bond Proceeds Account, after making the initial deposits to the 2017 Bond Fund, the balance of the proceeds from the sale of the 2017 Bonds; and (ii) an Equity Contribution Account, into which the Company shall deposit approximately $1,200,000 to provide for the payment of certain costs of issuing the Series 2017 Bonds, acquiring certain equipment for use at the Project, and providing for working capital for the Project. Equipment purchased from proceeds in the Equity Contribution Account shall not be subject to the lien of the Indenture or the demise of the Lease Agreement.
Debt Service Reserve Fund. From the proceeds of the Bonds there shall initially be deposited into the Debt Service Reserve Fund an amount equal to $524,700*. Moneys held for the credit of the Debt Service Reserve Fund shall be used for the purposes of paying interest on the Bonds as the same becomes due, and of paying maturing principal of the Bonds, whether at the stated payment date or by mandatory redemption as aforesaid, whenever and to the extent that the moneys held for the credit of the Bond Fund shall be insufficient for such purposes. Whenever there shall be held in the Bond Fund and the Debt Service Reserve Fund a total amount sufficient for paying the Bonds in full then outstanding under the Indenture, including the principal of and the interest on all Bonds and any redemption premium and any amounts needed to pay redemption expenses, such moneys shall be applied by the Trustee at the direction of the Company to the payment, purchase or redemption of such Bonds in full and the payment of all expenses in connection with any such purchase or redemption.
Capitalized Interest Fund. Funds in the amount of $640,575* will be deposited from proceeds of sale of the Bonds into the Capitalized Interest Fund, and will be used to pay interest on the Bonds payable on November 1, 2017, May 1, 2018, and November 1, 2018. On such dates moneys from the Capitalized Interest Fund shall be transferred to the Bond Fund and distributed to registered owners of the Bonds.
Flow of Funds
All earnings on the Bond Fund, Debt Service Reserve Fund, Capitalized Interest Fund, and all payments of Basic Rent received pursuant to the Lease Agreement shall be deposited to the Bond Fund. The amounts in the Bond Fund shall be disbursed solely to pay debt service on the Bonds. Amounts received as Additional Rent shall be used to replenish deficiencies to the Debt Service Reserve Fund, to pay the Trustee’s fees and expenses and to pay the annual fee to the Authority.
*Preliminary, subject to change
35 The Authority has covenanted that so long as the Bonds are outstanding, it will cause to be paid by the Company directly to the Trustee for deposit to the Bond Fund, all Rental Payments owing by the Company to the Authority under the Lease Agreement in the amounts set forth in the Indenture. The Trustee shall promptly upon the receipt of such Rental Payments deposit such money in the Bond Fund and in each month in which payments are due and received shall credit such Rental Payments so received to the Bond Fund, on or before the 25th day of the month next preceding an interest payment date, an amount equal to the interest and principal and premium, if any, payable on the Bonds on the next succeeding interest payment date; provided, however, that the amounts required by this subsection to be deposited in the appropriate account of the Bond Fund shall be credited by amounts on deposit in the Bond Fund on such date.
Additional Bonds
If no Event of Default shall have occurred and be continuing, the Authority may at any time and from time to time issue Additional Bonds, within the limitations of and upon compliance with the provisions of the Indenture, for any one or more of the following purposes:
(a) in the event the available proceeds from the sale of the Bonds are insufficient to pay all the Project Costs as provided in the Lease Agreement, for the purpose of obtaining funds with which to pay such costs;
(b) for the purpose of acquiring and/or constructing any additions, improvements or modifications (including, without limitation, any additional land, buildings and/or machinery, equipment and other personal property) to the facilities at the time forming a part of the Project;
(c) for the purpose of refunding or otherwise retiring all or any portion of any one or more series of Bonds then outstanding under the Indenture; and
(d) for a combination of the foregoing purposes.
The Additional Bonds may be in such denomination or denominations, shall bear interest at such rate or rates, shall bear such dates not inconsistent with the provisions hereof, shall mature in such amounts and at such times as are not in conflict with the provisions hereof, shall be in such form and may contain such provisions for redemption prior to maturity, all as may be provided in the Supplemental Indenture under which they are issued; provided that all such Additional Bonds shall be subject to redemption at any time, at such redemption price or prices as shall be fixed prior to their issuance, if all or substantially all of the Project shall be taken under the exercise of the power of eminent domain. Any redemption of Additional Bonds prior to maturity shall be effected in the manner set forth in and shall be subject to the provisions of the Indenture. All Additional Bonds so issued shall contain an appropriate series designation.
36 Prior to the issuance of any Additional Bonds, the Authority shall deliver or cause to be delivered to the Trustee those of the Additional Bonds proposed to be issued, duly executed and sealed, accompanied by the following:
(a) Supplemental Indenture. A supplemental indenture duly executed, sealed and acknowledged on behalf of the Authority and containing the following: (i) a description of such Additional Bonds, including the aggregate principal amount, the numbers and series designation, the denomination or denominations, the date, the interest rate or rates and the maturity or maturities thereof, the provisions for redemption thereof prior to maturity and the forms of such Additional Bonds and various certificates applicable thereto, (ii) provisions subjecting to the lien of the Indenture all properties acquired and to be acquired in connection with any additions, improvements and modifications to the Project, including any additional land not theretofore constituting part of the Project Site on which any such additions, improvements and modifications are, or are to be located, (iii) a confirmation of the lien of the Indenture on all properties then constituting a part of the Project, including specifically, without limiting the generality of the foregoing, all such properties acquired since the execution of the Indenture or Supplemental Indenture most recently executed, and (iv) any other provisions that do not conflict with the provisions hereof;
(b) Proceedings. A certified copy of the proceedings taken by the Directors of the Authority authorizing the issuance of such Additional Bonds and the execution and delivery of the Supplemental Indenture providing therefor, which said proceedings shall include a Resolution requesting the Trustee to authenticate and deliver such Additional Bonds and reciting the following: (i) that no Event of Default has occurred and is continuing and that no event which, with the giving of notice or the passage of time or both, would constitute an Event of Default has occurred and is continuing, (ii) the Person or Persons to whom such Additional Bonds have been sold and awarded and shall be delivered, (iii) the purchase price of such Additional Bonds, and (iv) a list of all Additional Bonds previously issued by the Authority hereunder and at the time outstanding and of the Supplemental Indentures under which they were issued;
(c) Certificate as to Revenues. A certificate signed by an Independent certified public accountant certifying that the Company’s earnings before interest, taxes, depreciation and amortization (EBITDA) during the Fiscal Year next preceding the date of issuance of such Additional Bonds was not less than one hundred and twenty-five percent (125%) of the Maximum Annual Debt Service with respect to the then outstanding Bonds and the Additional Bonds proposed to be issued;
(d) Confirmation of Title to Project Site. An opinion, acceptable to the Trustee and dated as of the date of the issuance of such Additional Bonds, of Independent Counsel acceptable to the Trustee stating that the Authority or the Company, as applicable, has a good and marketable interest in the land subjected to the lien of the Indenture pursuant to the provisions of clause (ii) of subsection (a) of this section, subject only to Permitted
37 Encumbrances, or, in lieu of such opinion, a policy or binder of title insurance, or an endorsement to a previously issued policy of title insurance, written by an insurer acceptable to the Trustee and insuring the fee interest of the owner in such land, except with respect to Permitted Encumbrances, in an amount not less than the principal amount of such of the Additional Bonds as are being issued to pay the costs of acquiring or improving real property (including such land) which constitutes, or is to constitute, part of the Project;
(e) Opinion of Independent Counsel. An opinion, acceptable to the Trustee and dated as of the date of the issuance of such Additional Bonds, of Independent Counsel acceptable to the Trustee approving the forms of all documents required by the preceding portions of this section to be delivered to the Trustee and stating that they comply with the applicable requirements of the Indenture; and
(f) Opinion of Bond Counsel. An opinion, dated as of the date of the issuance of such Additional Bonds, of Bond Counsel approving the validity of such Additional Bonds, and the Trustee shall be fully protected in relying upon such opinion.
Upon receipt of the documents required by the provisions of this section to be furnished to it, the Trustee shall, unless it has cause to believe any of the statements set out in said documents to be incorrect, thereupon execute the Supplemental Indenture so presented and cause the same to be filed for record at the expense of the Company in the public office or offices in the State of Alabama in which such document is then required by law to be filed in order to constitute constructive notice thereof, and it shall further authenticate the Additional Bonds with respect to which the said documents shall have been provided and shall, upon receipt of evidence satisfactory to it that the Authority has received the purchase price or other consideration therefor, deliver such Additional Bonds to the Person or Persons to whom the Resolution provided for in the Indenture directed that they be delivered.
Investments
Any moneys held as part of the Bond Fund, the 2017 Debt Service Reserve Fund, the 2017 Capitalized Interest Fund and the 2017 Project Fund shall be invested by the Trustee at the direction of the Company as provided in the Indenture.
Non-Presentment of Bonds
In the event any Bond shall not be presented for payment when the principal thereof becomes due, either at maturity or otherwise, or at the date fixed for redemption thereof, if moneys sufficient to pay such Bond have been deposited in the Bond Fund, all liability of the Authority to the owner thereof for the payment of such Bond shall cease. The Trustee shall hold such moneys, without liability for interest, for the benefit of the owner of such Bond, who shall thereafter be restricted exclusively to such moneys. Such moneys shall be held in a separate and segregated fund and shall not be invested. Any moneys so deposited with and held by the Trustee not so applied to
38 the payment of such Bond within four years after the final maturity or final payment of the Bonds shall, at the Company's direction, be paid by the Trustee to the Company. Thereafter, Bondholders shall be entitled to look only to the Company for payment but only to the extent of the amount so repaid to the Company. The Company shall not be liable for any interest thereon and shall not be regarded as a trustee of such moneys.
The foregoing provisions are subject to all applicable escheat laws.
Defaults and Remedies
The Indenture defines each of the following events as an “Event of Default”:
(a) payment of any interest on any Bond shall not be made when and as that interest shall become due and payable, and the failure to make such payment is not cured within two (2) Business Days;
(b) payment of the principal of or any premium on any Bond shall not be made when and as that principal or premium shall become due and payable, whether at stated maturity, by redemption (unless such redemption shall have been made conditional upon the actual deposit of moneys into the Bond Fund to effect such redemption in accordance with the terms of the Indenture), pursuant to any mandatory sinking fund requirements, by acceleration or otherwise, and the failure to make such payment is not cured on the next succeeding Business Day;
(c) failure by the Authority to observe or perform any other covenant, agreement or obligation on its part to be observed or performed contained in the Indenture or in the Bonds, which failure shall have continued for a period of 60 days after written notice, by registered or certified mail, to the Authority and the Company specifying the failure and requiring that it be remedied, which notice may be given by the Trustee in its discretion and shall be given by the Trustee at the written request of the owners of not less than a majority of the aggregate principal amount of Bonds then outstanding;
(d) the occurrence and continuation of an event of default as defined in the Lease Agreement; and
(e) the Authority shall: (i) commence a proceeding under any federal or state insolvency, reorganization or similar law, or have such a proceeding commenced against it and either have an order of insolvency or reorganization entered against it or have the proceeding remain undismissed and unstayed for 90 days; or (ii) have a receiver, conservator, liquidator or trustee appointed for it or for the whole or any substantial part of its property.
Upon the occurrence of an Event of Default as described in paragraphs (a) and (b) above, the Trustee shall, and upon the occurrence of any other Event of Default described above, the
39 Trustee may, and if requested to do so by the owners of a majority in aggregate principal amount of the Bonds then outstanding shall, accelerate the maturity of the Bonds.
Upon the occurrence of an Event of Default, the Trustee may also pursue any remedy available to it at law or in equity by suit, action, mandamus or other proceeding to enforce the payment of principal of, premium, if any, and interest on the Bonds, and may foreclose on the mortgage of the Project granted pursuant to the Indenture.
The owners of a majority in aggregate principal amount of the Bonds then outstanding will have the right, by written instrument delivered to the Trustee, to direct the time, method and place of conducting all remedial proceedings to be taken by the Trustee under the Indenture, but the direction must comply with law and the Indenture.
No owner of any Bond will have the right to pursue any remedy under the Indenture unless (i) an Event of Default has occurred of which the Trustee has been notified or is deemed to have, or is required to take, notice as provided in the Indenture, (ii) the owners of at least a majority in aggregate principal amount of the Bonds outstanding have made written request to the Trustee to pursue such remedy and have offered to provide the Trustee with indemnity as provided in the Indenture, and (iii) the Trustee does not comply with such request after receipt of such request and offer of indemnity.
Waivers of Events of Default
The Trustee may in its discretion at any time, except as provided below, waive any Event of Default described in the Indenture and its consequences and may rescind and annul any declaration of maturity of principal of the bonds, provided, however, there shall not be waived any Event of Default described in paragraph (a) or (b) above except with the written consent of the owners of all Bonds then outstanding, nor shall any declaration of acceleration in connection therewith be rescinded or annulled except with the written consent of the owners of at least a majority in aggregate principal amount of the Bonds then outstanding.
Supplemental Indentures
The Indenture provides that the Authority and the Trustee may, without notice to or the consent of the owners of any of the Bonds, enter into supplemental indentures for any of the following purposes:
(a) to cure any ambiguity, formal defect or omission in the Indenture;
(b) to grant to the Trustee for the benefit of the Bondholders any additional rights, remedies, powers or Authority;
(c) to assign additional revenues under the Indenture;
40 (d) to accept additional security and instruments and documents of further assurance with respect to the Project;
(e) to add to the covenants, agreement and obligations of the Authority under the Indenture, other covenants, agreements and obligations to be observed for the protection of the owners, or to surrender or limit any right, power or Authority reserved to or conferred upon the Authority in the Indenture;
(f) to evidence any succession to the Authority and the assumption by its successor of the covenants, agreements and obligations of the Authority under the Indenture, the Lease Agreement and the Bonds;
(g) to permit the exchange of Bonds, at the option of the owner or owners thereof, in an aggregate principal amount not exceeding the unmatured and unredeemed principal amount of the Predecessor Bonds (as defined in the Indenture), bearing interest at the same rate or rates and maturing on the same date or dates, if in the opinion of Bond Counsel selected by the Trustee, that exchange would not result in the interest on any of the Bonds outstanding becoming includable in gross for federal income tax purposes;
(h) to permit the use of a book entry system to identify the owner of an interest in an obligation issued by the Authority under the Indenture, whether that obligation was formerly, or could be, evidenced by a tangible security;
(i) to permit the Trustee to comply with obligations imposed upon it by law;
(j) to specify further the duties and responsibilities of, and to define further the relationship among, the Trustee, the Registrar and any Paying Agents;
(k) to achieve compliance of the Indenture with any applicable federal securities or tax law;
(l) to permit any other amendment which, in the judgment of the Trustee, is not to the prejudice of the Trustee or the owners; and
(m) to conform the text of the Indenture to any description or summary of the Indenture in any official statement or other offering document with respect to the Bonds to the extent that such description or summary was intended to be a verbatim recitation of a provision of the Indenture.
The owners of a majority in aggregate principal amount of the outstanding Bonds shall have the right to consent to the execution by the Authority and the Trustee of any other supplemental indentures, except that no supplemental indenture shall permit or be construed as permitting without the consent of the owner of each Bond affected:
41
(a) (i) an extension of the maturity of the principal of or the interest on any Bond, (ii) a reduction in the principal amount of any Bond or the rate of interest or premium thereof, or (iii) a reduction in the amount or extension of time for paying any mandatory sinking fund requirements; or
(b) (i) the creation of privilege or priority of any Bond or Bonds over any other Bond or Bonds, or (ii) a reduction in the aggregate principal amount of the Bonds required for consent to a supplemental indenture.
Amendments to the Lease Agreement
The Authority and the Company may, with the written consent of the Trustee, but without the consent of or notice to the owners of the Bonds, enter into any amendment to the Lease Agreement as may be required: (a) by the provisions of the Lease Agreement or the Indenture, (b) for the purpose of curing any ambiguity, inconsistency or formal defect or omission in the Lease Agreement, (c) in connection with an amendment or to effect any purpose for which there could be an amendment of the Indenture, (d) in connection with any other change therein which is not to the prejudice of the Trustee or the owners of the Bonds in the judgment of the Trustee, or (e) to conform the text of the Lease to any description or summary of the Lease in any official statement or other offering document with respect to the Bonds to the extent that such description or summary was intended to be a verbatim recitation of a provision of the Lease Agreement.
. Except for the modifications contemplated in the preceding paragraph, neither the Authority nor the Trustee shall consent to:
(a) any amendment, change or modification to the Lease Agreement which would change the amount or times as of which Rental Payments are required to be paid, without the giving of notice as provided in the Indenture of the proposed amendment, change or modification and receipt of the written consent thereto of the owners of all of the then outstanding Bonds, or
(b) any other amendment, change or modification of the Lease Agreement without the giving of notice as provided in the Indenture of the proposed amendment, change or modification and receipt of the written consent thereof of the owners of not less than a majority in aggregate principal amount of the Bonds then outstanding.
Neither the Authority nor the Company shall enter into any amendment or supplement to the Lease Agreement other than as provided above without the mailing of notice to and the written approval or consent of the owners of not less than a majority in aggregate principal amount of the outstanding Bonds.
42 Discharge of the Indenture
The Indenture provides that if the Authority shall pay or cause to be paid, or there shall be otherwise paid or provision for payment made by the deposit of moneys or Government Obligations (defined as direct obligations of, or obligations the timely payment of the principal of and interest on which are fully and unconditionally guaranteed by, the United States of America) to or for the benefit of the owners of the Bonds, in an amount or amounts equal to the principal of, premium, if any, and interest due or to become due on such Bonds, and if the Authority shall pay or cause to be paid to the Trustee all sums of money due or to become due according to the provisions of the Indenture, then the estate and rights granted by the Indenture shall cease and be void, and the lien of the Indenture shall be discharged and defeased. After that, the owners of the Bonds must look only to such deposited moneys and/or Government Obligations for payment of principal of, premium, if any, and interest on the Bonds.
Removal of Trustee
The Trustee may be removed at any time by an instrument or document in writing delivered to the Trustee, with copies thereof mailed to the Authority and the Company, and signed (i) by or on behalf of the Holders of not less than a majority in aggregate principal amount of the Bonds then outstanding, or (ii) as long as no Event of Default has occurred and is continuing, by the Company.
The Trustee also may be removed at any time for any breach of trust or for acting or proceeding in violation of, or for failing to act or proceed in accordance with, any provision of the Indenture with respect to the duties and obligations of the Trustee by any court of competent jurisdiction upon the application of the Authority or the Holders of not less than a majority of the aggregate principal amount of the Bonds then outstanding under the Indenture.
THE LEASE AGREEMENT
The following, in addition to information provided elsewhere in this Official Statement, summarizes certain provisions of the Lease Agreement, to which document reference is made for the detailed provisions thereof. Pursuant to the Lease Agreement, a portion of the proceeds of the Bonds will be used to finance a portion of the cost of acquiring and constructing the Project, which is leased to the Company.
Payments
Pursuant to the Lease Agreement, the Company will agree to pay to the Trustee Basic Rent in amounts sufficient to pay when due the principal of, premium, if any, and interest on the Bonds. Such payments will be made in the amounts and in the manner provided in the Indenture for the payment of the principal of, premium, if any, and interest on the Bonds, whether at maturity, upon acceleration, or upon redemption. In addition, the Company will agree to pay the reasonable fees,
43 including the annual fee to the Authority, and appropriate expenses of the Authority incurred in connection with the Authority's duties and obligations under the Lease Agreement and the Indenture and the reasonable and appropriate fees and expenses of the Trustee in connection with the Bonds. Additionally, pursuant to the Lease Agreement, the Company will agree to pay Additional Rent in order to pay the Trustee’s fees and expenses, as well as to cure any shortfalls or deficiencies in the Debt Service Reserve Fund (see “THE INDENTURE” herein). The obligation of the Company to make payments under the Lease Agreement shall be secured by a pledge of the Pledged Revenues from the Project (see “SECURITY FOR THE BONDS - Nature of the Company’s Obligation”).
Prepayment of the Lease
The Company shall have the option to prepay the Lease in full or in part under certain conditions which correspond to the redemption provisions of the Bonds. See “The Bonds -- Extraordinary Optional Redemption Without Premium” and “THE BONDS -- Optional Redemption of Bonds.” In addition, prepayment of the Lease Agreement is required under certain circumstances. See “THE BONDS -- Mandatory Redemption upon Determination of Taxability” and “THE BONDS -- Mandatory Redemption Upon Unenforceability.”
Obligations Absolute and Unconditional
The Company’s obligations under the Lease Agreement to pay the amounts due thereunder with respect to the Bonds are absolute and unconditional and will not be subject to any defense other than payment or to any right of setoff, counterclaim, abatement or otherwise.
Obligation to Maintain Adequate Rates
The Company will at all times operate the Project as revenue producing solid waste disposal facilities and will fix, maintain and collect such rates, charges and fees for the acceptance, disposal, storage or processing of waste and other services provided by the Project, as shall be necessary for the Project to be and remain self-supporting. Without limiting the generality of the foregoing, the Company will fix and maintain such rates, charges and fees for the acceptance, disposal, storage or processing of refuse, garbage and other waste and other services provided by the Project, and will make collections thereof in such manner, as shall produce in each Fiscal Year Pledged Revenues sufficient to pay, when due, all operating expenses, and to enable the Trustee to make all payments provided in the Indenture to be made into the Bond Fund and the Debt Service Reserve Fund, all at the times and in the manner required herein and in the Indenture. Maintenance of Corporate Existence; Consolidation or Merger
The Company agrees that so long as any Bonds are outstanding it will maintain its corporate existence, will not transfer all or substantially all of its assets and will not consolidate with or merge into another corporation, without the express written consent of the holders of a majority in principal amount of the Bonds; provided, however that the Company may consolidate
44 with or merge into a wholly-owned subsidiary of the Company, and may consolidate with or merge into another corporation or transfer all or substantially all of its assets and thereafter dissolve and terminate its existence, but only on the condition that (a) the resulting corporation or transferee, as applicable, shall expressly assume and agree in writing to perform all of the Company’s obligations under the Lease Agreement and the Tax Regulatory Agreement and is duly qualified to do business in Alabama, (b) such transfer or merger will not cause the Project to be in nonconformance with the purposes or provisions of the Act, (c) the resulting corporation or transferee, as applicable, has a consolidated net worth, determined in accordance with generally accepted accounting principles, equal to or greater than consolidated worth of the Company immediately prior to such consolidation, merger or transfer and (d) the transferee or the corporation with which the Company is merged or consolidated shall not have any unresolved legal or administrative proceedings pending before any court or other tribunal, the results of which could materially and adversely affect such corporation's or transferee’s net worth, its ability to assume the Company’s obligations under the Lease Agreement and the Tax Regulatory Agreement, or its ability to operate the Project.
Tax Covenants
The Company agrees, as long as the Bonds are outstanding, that (i) it will not take, or fail to take, any action that would or could cause the Authority or the Trustee to be in default thereunder and (ii) it has not taken or permitted to be taken, and will not take or permit to be taken, any action on its part that will cause the interest on the Bonds to be included in the gross income of the owners of the Bonds for purposes of Federal income taxation (except for any Bond during any period that such Bond is held by a “substantial user” of the Project or a “related person” as provided by Section 147(a) of the Internal Revenue Code of 1986, as amended).
Defaults
The Lease Agreement provides that the occurrence of one or more of the following events will constitute an “event of default” thereunder:
(a) the Company’s failure to make any payment required to be made under the Lease Agreement within two (2) business days of the day the same becomes due and payable, including any failure to make any required prepayment under the Lease Agreement at the time required;
(b) the occurrence of an Event of Default under the Indenture, the Tax Regulatory Agreement or the Bond Purchase Agreement;
(c) the Company’s failure to observe and perform any of its other covenants, conditions or agreements contained in the Lease Agreement for a period of 60 days after written notice (unless the Authority and the Trustee and the Company shall agree in writing to an extension of such time prior to its expiration) specifying such failure and requesting that it be remedied, given by the Authority or the Trustee to the Company;
45 (d) if any representation or warranty by the Company contained in the Lease Agreement, the Tax Regulatory Agreement or the Bond Purchase Agreement, or in any certificate or instrument delivered by the Company pursuant to the Lease Agreement, the Tax Regulatory Agreement or the Bond Purchase Agreement, is false or misleading in any material respect as of the date made;
(e) the Company’s making a general assignment for the benefit of creditors, or admitting in writing its inability, or actual failing to pay its debts as they become due, or filing a petition in bankruptcy, or filing a petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, or filing any answer admitting or not contesting the material allegations of a petition against it in any such proceeding, or seeking or contesting to or acquiescing in the appointment of any custodian trustee, interim trustee, receiver or liquidator of it or of any material part of its properties;
(f) the Company’s failure, within 90 days after the commencement of any proceeding against it seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, to have such proceeding dismissed, or, within 90 days after the appointment without its consent or acquiescence of any custodian, trustee, interim trustee, receiver or liquidator of it or of any material part of its properties, to have such appointment vacated, or within 90 days after being adjudicated bankrupt or insolvent, to have such decree or order stayed or discharged; and/or
(g) any foreclosure of, or involuntary ouster of the Company from possession of, the Project or Project Site or any portion thereof, or any voluntary transfer of possession or right of possession of the Project or Project Site or any portion thereof, except as specifically provided in the Lease Agreement, without the written consent of the Authority and the holders of at least a majority of the outstanding principal amount of the Bonds; provided, however, that so long as the Company continues to make all scheduled payments under the Lease Agreement, it shall not be in default under these provisions.
Remedies
The Lease Agreement provides that, whenever any event of default shall have happened and be continuing, then:
(a) the Trustee may re-enter and take possession of the Project, exclude the Company from possession thereof and rent the same for the account of the Company, holding the Company liable for the balance due thereunder;
(b) the Trustee may terminate the Lease Agreement, exclude the Company from possession of the Project and lease the same for the account of the Authority and the
46 Company, holding the Company liable for all Rental Payments due up to the date such new lease is made for the account of the Authority and the Company;
(c) the Trustee may declare all payments on the Lease Agreement and the Bonds to be immediately due and payable, whereupon the same shall become immediately due and payable;
(d) the Trustee may have access to and inspect, examine and make copies of, the financial records and accounts of the Company pertaining to the Project and Project Site and the operation thereof;
(e) the Trustee may exercise any remedy provided for in the Indenture, including the foreclosure of the mortgage on the Project granted in the Indenture and the sale of the interest in the Project as provided in the Indenture; and/or
(f) the Trustee may take whatever action at law or in equity may appear necessary or desirable to collect any sums then due and thereafter to become due under the Lease Agreement or to enforce the observance or performance of any covenant, condition or agreement of the Company under the Lease Agreement.
Amendments
The Lease Agreement may be amended subject to the limitations contained in the Indenture. See “THE INDENTURE -- Amendments to the Lease Agreement.”
TAX EXEMPTION
In the opinion of Waldrep, Stewart & Kendrick, L.L.C., Birmingham, Alabama, Bond Counsel, assuming continuing compliance with certain covenants, interest on the Series 2017 Bonds is excludable from gross income for purposes of federal income taxation, except during any period such Bond is held by a “substantial user,” or “related person” within the meaning of Sections 147(a) and 144(a)(3), respectively, of the Internal Revenue Code of 1986, of the facility financed with the Bonds.
In rendering its opinion, Bond Counsel will rely on, and will assume the accuracy of, certain representations and certifications and compliance with certain covenants of the Company and the Authority contained in various documents included in the transcript of proceedings, which are intended to evidence and assure that the Series 2017 Bonds are and will remain obligations the interest on which is excluded from gross income for federal income tax purposes. Bond Counsel will not independently verify the accuracy of such certifications and representations and will not monitor compliance with such covenants.
The Internal Revenue Code prescribes a number of qualifications and conditions for the interest on state and local government obligations to be and remain excluded from gross income
47 for federal income tax purposes. Some of these require continued compliance after issuance of the Bonds in order for the interest to be and continue to be so excluded from the date of issuance. Noncompliance with such requirements could cause the interest on the Bonds to be included in gross income for federal income tax purposes, in some cases, effective from the date such Bonds are initially issued. In particular, interest on the Bonds will become includable in gross income for purposes of federal income taxation, if certain earnings, if any, received from the investment of the proceeds of the Bonds and certain other funds are not rebated to the United States as provided in Section 148(f) of the Internal Revenue Code and there is not compliance with certain other restrictions relating to the investment of the proceeds of the Bonds and such other funds. The Company and the Authority have covenanted in the Lease Agreement and the Indenture to take all actions that may be required for the interest on the Bonds to be and remain excluded from gross income for federal income tax purposes, and not to take any actions that would adversely affect such exclusion under the provisions of the Internal Revenue Code.
Under the Internal Revenue Code, interest on the Bonds is an item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations by Section 55 of the Internal Revenue Code. In addition, for taxable years beginning after 1986, interest on the tax-exempt bonds earned by some corporations could be subject to the environmental tax imposed by Section 59A of the Internal Revenue Code, interest on the Bonds earned by certain foreign corporations doing business in the United States could be subject to the branch profits tax imposed by Section 884 of the Internal Revenue Code, and interest on the Bonds could be subject to a tax imposed on excess passive income of certain Subchapter S corporations.
Under the Internal Revenue Code, the receipt of interest excluded from gross income can have certain adverse federal income tax consequences on items of income or deductions for certain taxpayers, including financial institutions, property and casualty insurance companies, recipients of Social Security and Railroad Retirement benefits, and taxpayers who are deemed to incur or continue indebtedness to acquire or carry tax-exempt obligations.
Bond Counsel is also of the opinion that, under existing law, interest on the Bonds is exempt from State of Alabama income taxation.
The foregoing is not intended as a detailed or comprehensive description of the possible tax consequences of purchasing or holding the Bonds. Persons considering the purchase of Bonds should consult with their tax advisors as to the consequences of buying or holding the Bonds in their particular circumstances.
Original Issue Discount
In the opinion of bond counsel, under existing law, the original issue discount in the selling price of a Bond, to the extent properly allocable to each owner of such Bond, is excluded from gross income for federal income tax purposes with respect to such owner. The original issue discount is the excess of the stated redemption price at maturity of such Bond over the initial offering price to the public, excluding underwriters and other intermediaries.
48
Under Section 1288 of the Internal Revenue Code of 1986, as amended, original issue discount on tax-exempt bonds accrues on a compound basis. The amount of original issue discount that accrues to an owner of a Bond during any accrual period generally equals (i) the issue price of such Bond plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (ii) the yield to maturity of such Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), less (iii) any interest payable on such Bond during such accrual period. The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excluded from gross income for federal income tax purposes, and will increase the owner’s tax basis in such Bond. Any gain realized by an owner from a sale, exchange, payment or redemption of a Bond will be treated as gain from the sale or exchange of such Bond.
LEGAL MATTERS
Certain legal matters incidental to the issuance of the Bonds are subject to the approving opinion of Waldrep, Stewart & Kendrick, L.L.C., Birmingham, Alabama, Bond Counsel. Certain legal matters will be passed upon for the Company by its counsel, Schreeder, Wheeler & Flint, LLP, Atlanta, Georgia, and for the Underwriter by its counsel, Maynard, Cooper & Gale, P.C.
The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.
NO RATINGS
No ratings were applied for or received in connection with the issuance of the Bonds.
ABSENCE OF MATERIAL LITIGATION REGARDING THE BONDS
On the date of issuance of the Bonds, the Authority and the Company will each deliver a certificate to the effect that there is no litigation or proceedings pending or, to its best knowledge, threatened against such party seeking to enjoin the issuance, execution or delivery of the Bonds, or in any way contesting or affecting any authority for the issuance, execution or delivery of the Bonds, or the validity of the Bonds, or seeking to enjoin any transaction or questioning the validity of any transaction relating to the Bonds, or contesting the existence or powers of such party.
49 UNDERWRITING
Duncan-Williams, Inc. (the “Underwriter”) has agreed, subject to certain conditions, to purchase all but not less than all the Bonds at a price representing an aggregate underwriting discount of $______from the initial offering price set forth on the cover page hereof. The initial offering prices for the Bonds set forth on the cover page may be changed from time to time by the Underwriter; and the Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing the Bonds into investment trusts) and others at prices lower than the then offering price. The Company and the Authority have agreed to indemnify the Underwriter against certain liabilities arising under the securities laws with respect to this Official Statement and the offering of the Bonds. Additionally, the company will pay the Underwriter $______in additional fees from its own funds.
CONTINUING DISCLOSURE
The Authority has determined that no financial or operating data concerning the Authority is material to any decision to purchase, hold or sell the Bonds, and the Authority will not provide any such information. The Company has undertaken all responsibilities for any continuing disclosure to Bondholders as described below, and the Authority shall have no liability to the Bondholders or any other person with respect to such disclosures.
The Company has entered into a Continuing Disclosure Agreement, as set forth in Appendix C hereto, obligating the Company to send, or cause to be sent, certain financial information to certain information repositories annually and to provide notice, or cause notice to be provided, to the Municipal Securities Rulemaking Board, through its Internet-based Electronic Municipal Market Access System (“EMMA”) upon the occurrence of certain enumerated events for the benefit of the Beneficial Owners and Registered Owners of any of the Bonds, pursuant to the requirements of Section (b)(5)(i) of Rule 15c2-12 of the United States Securities and Exchange Commission (the “Rule”). See “APPENDIX C - FORM OF CONTINUING DISCLOSURE AGREEMENT” attached hereto. The Company has not entered into any other such undertaking with respect to the Rule.
A failure by the Company to comply with the provisions of the Disclosure Agreement will not constitute a default under the Indenture or the Loan Agreement (although Bondholders will have any available remedy at law or in equity). Nevertheless, such a failure to comply must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Such a failure may adversely affect the transferability and liquidity of the Bonds.
50 CERTIFICATION AS TO OFFICIAL STATEMENT
At the time of payment for and delivery of the Bonds, each of the Authority and the Company will furnish the Underwriter a certificate signed by a duly authorized representative of the Authority or the Company, as applicable, to the effect that (i) the descriptions and statements, including financial data, of or pertaining to the Authority or the Company, as applicable, on the date of the Preliminary Official Statement, on the date of the final Official Statement, on the date of the sale of the Bonds, and on the date of the delivery thereof, were and are true in all material respects, and, insofar as such matters are concerned, the Official Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (ii) insofar as the descriptions and statements, including financial data, of or pertaining to governmental and/or nongovernmental entities other than the Authority or the Company, as applicable, and their activities contained in the Official Statement are concerned, such descriptions, statements, and data have been obtained from sources which the Authority or the Company, as applicable, believes to be reliable and the Authority or the Company, as applicable, has no reason to believe that they are untrue or incomplete in any material respect; and (iii) there has been no adverse material change in the affairs of the Authority or the Company, as applicable, between the date the Official Statement was deemed final by the Authority and the date of delivery of the Bonds.
No representation is made to the holders of the Bonds that Bond Counsel has verified the accuracy, completeness or fairness of the statements in the Official Statement, and Bond Counsel assumes no responsibility to the holders of the Bonds with respect thereto, except for the matters set forth, and to the extent, set forth in such counsel's opinions.
MISCELLANEOUS
The agreement of the Authority with the holders of the Bonds is fully set forth in the Indenture, and neither any advertisement of the Bonds nor this Official Statement is to be construed as constituting an agreement with the purchasers of the Bonds. Any statements made in this Official Statement involving estimates, projections or matters of opinion, whether or not expressly so stated, they are intended merely as such and not as representations of fact. The attached Appendices are an integral part of this Official Statement and must be read together with all of the foregoing statements.
51 The execution and delivery of this Official Statement have been authorized by the Authority and the Company.
CHEROKEE SOLID WASTE DISPOSAL AUTHORITY
By: /s/______Its: Chairman
CWI ALABAMA, LLC
By: /s/______Its: President
52
APPENDIX A
Form of Bond Counsel Opinion
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May __, 2017
Cherokee Solid Waste Disposal Authority Cherokee, Alabama
Duncan-Williams, Inc. Memphis, Tennessee
CWI Alabama, LLC Atlanta, Georgia
Ladies and Gentlemen:
We have examined certified copies of proceedings and other documents showing the organization under the laws of Alabama of CHEROKEE SOLID WASTE DISPOSAL AUTHORITY (herein called the “Authority”), together with copies of proceedings of the Authority and other documents submitted to us pertaining to the issuance and validity of
Cherokee Solid Waste Disposal Authority
$______,000* __% Tax-Exempt Solid Waste Disposal Revenue Bonds (CWI Alabama, LLC. Project) Series 2017 (the “Bonds”)
In rendering the opinion hereinafter expressed with respect to the exclusion of the interest income on the Bonds from gross income of the recipients thereof for federal income tax purposes, and the inapplicability of (i) the registration requirements of the Securities Act of 1933, as amended, to the Bonds, and (ii) the qualification requirements of the Trust Indenture Act of 1939, as amended, to the Indenture hereinafter referred to, we have relied, in part, upon certain representations made by CWI Alabama, LLC hereinafter referred to. The statements hereinafter made and the opinions hereinafter expressed are based upon our examination of said proceedings and documents and upon said representations.
The documents submitted to us show as follows:
(a) That the Bonds constitute all of a total authorized issue of bonds in the aggregate principal amount of $______which have been issued under the provisions of a Mortgage and Trust Indenture dated as of May 1, 2017 (herein called the “Indenture”) from the
* Preliminary, subject to change.
A-1 Authority to Wilmington Trust, National Association, as trustee (herein called the “Trustee”) with respect to the Project hereinafter referred to;
(b) That the Authority and CWI Alabama, LLC, a Georgia limited liability company (herein called the “Company”), have entered into a Lease Agreement dated as of May 1, 2017 (herein called the “Lease”), wherein the Authority has agreed to lease to the Company certain real property, machinery and equipment located therein, (the said real property, machinery and equipment and the said improvements being herein together called the “Project”) for a term extending until 11:59 o'clock, P.M., on May 1, 2037; and (c) That in the Lease, the Company has made certain covenants (herein called the “Compliance Covenants”) to the effect that it will comply with certain conditions to and requirements for the continued exclusion from gross income of the recipients thereof of the interest income on the Bonds. We are of the following opinion: (1) That the Authority has been duly organized and is validly existing as a public corporation pursuant to the Constitution and laws of the State of Alabama and has corporate power under the laws of the State of Alabama, including particularly the provisions of Section 11-89A-1 et seq. of the Code of Alabama 1975, as amended (herein called the “Authorizing Act”) to issue the Bonds, to execute and deliver the Bonds, the Lease and the Indenture, and to perform its obligations under each thereof; (2) That the Authorizing Act is valid under the Constitution and laws of the State of Alabama and the Bonds have been issued in conformity with the provisions of the Authorizing Act; (3) That the Lease and the Indenture have been duly authorized, executed and delivered by the Authority and are valid and binding upon it and enforceable in accordance with their terms except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by usual equity principles which may limit the specific enforcement under state law of certain remedies, but which do not affect the validity of such documents and do not make inadequate other remedies available to the holders of the Bonds for the enforcement of such obligations; (4) That the Bonds have been duly authorized, sold, executed and issued, in the manner provided by the applicable provisions of the Constitution and laws of Alabama, are in due and legal form and evidence valid and binding special obligations of the Authority payable, as to principal, premium, if any, and interest, solely out of the revenues and receipts derived from the leasing or sale of the Project, as it may at any time exist; (5) That the Bonds are secured, pro rata and without preference or priority of one over another or of any of the Bonds over any other bond issued under the Indenture by a valid pledge of the revenues and receipts to be derived by the Authority from the leasing or sale of the Project (including specifically the rentals payable to the Authority by the Company under the Lease) and by the provisions of the Indenture;
A-2 (6) That no registration is necessary with respect to the Bonds under the Securities Act of 1933, and the Indenture is exempt from qualification under the Trust Indenture Act of 1939; (7) That under presently existing law, the interest on the Bonds is exempt from income taxation by the State of Alabama; and (8) Under existing statutes, regulations, rulings and court decisions, the interest on the Bonds is excludable from gross income for federal income tax purposes except for interest on any Bond for any period during which such Bond is held by any person who is a “substantial user” of the Project or a “related person” to such “substantial user” within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Such interest is an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. In addition to the conditions and exception stated therein, the opinion set forth in the first sentence of this paragraph is subject to the condition that the Authority and the Company comply with all requirements of the Code which must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Authority and the Company have covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for such purposes to be retroactive to the dates of the issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Bonds. We have not examined the title of the Authority to the Project, and therefore express no opinion thereof.
Yours very truly,
A-3
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APPENDIX B
VALUE ESTIMATION AND REVIEW OF THE PROJECT
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