An unrated municipal-bond sale for a Kentucky theme park to be built around a full-scale replica of Noah’s Ark shrank to $10.5 million from a planned $62 million.
The northern Kentucky city of Williamstown issued the debt this week for affiliates of Answers in Genesis, a Christian nonprofit. The portion of the taxable deal maturing in October 2028 priced to yield 6 percent, according to data compiled by Bloomberg. The interest rates matched what the issuer expected before the sale.
Michael Zovath, co-founder of Answers in Genesis, referred questions about the bond offer to Dan Blank, a managing director in Cincinnati at Ross Sinclaire & Associates, which served as underwriter on the transaction. Blank didn’t immediately respond to a voice-mail or e-mail seeking comment.
Proceeds are intended to help build a 510-foot (155.4-meter) wooden ship, the centerpiece of a planned biblical theme park called “Ark Encounter.” The first phase is estimated to cost $73 million, offering documents show. About $14 million had been raised before the bond sale, which was supposed to make up the difference.
Industrial-development bonds are considered the riskiest municipal debt because they accounted for the largest proportion of defaults from 1970 to 2011, according to the Federal Reserve Bank of New York.
Williamstown issued the debt without a rating, making the prospect of repayment even less clear. More than 90 percent of municipal issuers in default initially offered bonds without a credit grade, according to Concord, Massachusetts-based Municipal Market Advisors.
Construction is supposed to begin in March, with Ark Encounter slated to open in April 2016. It will be built on about 200 acres, with 800 acres reserved for ventures such as hotels and restaurants, offering documents show.
The documents cite at least 39 risks to buyers, including that Answers in Genesis has no obligation to back the debt. Bondholders’ sole revenue stream comes from money spent at Ark Encounter.
Earnings are supposed to fund future attractions such as the “Ten Plagues Ride” and a 100-foot-high “Tower of Babel,” according to the offering statement. The group will embark on major capital projects every other year starting in the third year the venue is open, documents show.
Gene Gard at Dupree & Co., Triet Nguyen at Axios Advisors LLC and Bill Black at Invesco Ltd. were among muni investors and analysts who were skeptical of the project’s feasibility.
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