Filing: Mortgage lender says indictments may hurt Schlitterbahn' - KCTV5

Filing: Mortgage lender says indictments may hurt Schlitterbahn's ability to repay loans

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(File photo) (File photo)
KANSAS CITY, KS (KCTV) -

Recent criminal indictments against the operator and co-owner of the Schlitterbahn park in Kansas City, KS could hurt a company's chances of repaying a $174.3 million loan, a public filing said this week. 

In a filing to the Securities and Exchange Commission, EPR Properties say the indictments "may negatively impact the likelihood of repayment of the related mortgage loans secured by the waterpark and other collateral and have a material adverse effect on the Company’s business, operating results, cash flows, financial condition and liquidity."

EPR says in the filing, it may need to "restructure the mortgage loans" or "foreclose on the collateral underlying the loans." 

The filing also states that that additional STAR Bonds may be needed to "fully repay the loans." 

"If additional STAR bonds cannot be issued, the likelihood that SVV (Schlitterbahn) will be able to fully repay the mortgage loans will be negatively impacted."

EPR Properties is a specialty real estate investment trust that's located in Kansas City. 

Full statement from the filing:

The Company has provided mortgage loans to SVV I, LLC (“SVV”) and certain SVV affiliates, which were originally utilized by SVV to construct the Schlitterbahn Kansas City Waterpark and develop excess property adjacent to the waterpark in Kansas City, Kansas (the “Project”). The aggregate outstanding principal balance and related accrued interest receivable for the mortgage loans was $174.3 million at December 31, 2017, and SVV accounted for approximately 3% of total revenue for the fiscal year ended December 31, 2017. The loans are secured by the Project and certain additional waterpark properties operated by affiliates of SVV located in New Braunfels, Texas and South Padre Island, Texas. On March 21, 2018, SVV, one of the owners of SVV and certain related parties were criminally indicted on multiple counts in connection with the investigation of a 2016 fatality that occurred at the waterpark. The counts alleged in the indictments carry penalties of imprisonment and fines, including aggregate fines for SVV of up to $3.5 million. The Company has no opinion as to the merits of these indictments.

An anticipated source of repayment on the mortgage loans is the issuance of sales tax revenue bonds (“STAR Bonds”) which have been committed for the Project. The STAR Bonds are issuable in tranches as the development Project is completed and require additional approval from the State of Kansas and the local government prior to each issuance. There can be no assurance that the recent criminal indictments will not delay or cause the State of Kansas or the local government to refuse to provide the necessary approval for future issuances. If additional STAR Bonds cannot be issued, the likelihood that SVV will be able to fully repay the mortgage loans will be negatively impacted. In addition, negative publicity may have a negative impact on attendance at the Schlitterbahn waterparks, which may reduce the funds available to SVV to repay the mortgage loans. In the event that SVV defaults on the mortgage loans, the Company may need to restructure the mortgage loans, foreclose on the collateral underlying the loans or take other action with respect to the property, which could reduce the Company’s revenue associated with the mortgage loans, require the Company to record a provision for loan loss or incur additional expenses. The occurrence of any of the foregoing events may have a material adverse effect on the Company’s business, operating results, cash flows, financial condition and liquidity.

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