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St. Paul Port Authority can't shed bond fund, high court says
- Article by: Star Tribune
- Updated: September 10, 2009 - 11:10 PM
The state Supreme Court ruling means the Port Authority and bondholders will be back in court over a fund that can't fully pay its investors back.
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The St. Paul Port Authority is going to have to try a different approach to scrubbing a bond fund that the agency says will never fully pay back bondholders, according to a ruling by the Minnesota Supreme Court.
The high court said Ramsey County District Court didn't have the jurisdiction to change the terms of the bond contract and directed the lower court to reexamine it rulings in 2002 and 2004 that let the Port Authority buy back bonds from willing sellers at a discount.
In 2006, the Port Authority asked a Ramsey County judge to end the so-called 876 Fund, sell the remaining assets to the high bidder and pay off the bondholders. The judge granted that request in 2007.
But some bondholders appealed, saying that it was an unfair deal and that the Port Authority had a conflict of interest because it wanted to shed the debt while it also had a fiduciary responsibility to them.
About $52 million of the bonds remain outstanding.
Keith Broady, an attorney representing the bondholders, called Thursday's ruling significant.
"The high court clearly stated that courts don't have jurisdiction to change bond contracts, and "that [gives] certainty to the system," he said.
Tom Collins, Port Authority spokesman, said the agency is looking at its options.
"Essentially it means we'll be starting the process all over again," he said.
Chris Havens
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