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By James Roxbury
Wednesday March 26, 2014 at 2:46 pm

Harrisburg University defaulted on the March 1, 2014 Debt Service Payment. Dauphin county paid to UMB Bank (Trustee) $1.5 million as the first guarantor of the 2007 series B Revenue Bond, this is the fourth year of default by the university with the county paying $6 million, the county has guaranteed a total of $15 million of the 2007 series bond.

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As published by EMMA - Electronic Municipal Market Access January 9, 2014.




Please forward this Notice to beneficial holders.

UMB Bank, N.A. (the “Trustee”) is successor indenture trustee under the Trust Indenture (the “Indenture”), dated as of January 1, 2007, by and between The Harrisburg Authority (the “Authority”) and Commerce Bank, National Association, as trustee, pursuant to which the Authority issued its University Revenue Bonds, Series A of 2007 (The Harrisburg University of Science and Technology Project) and its University Revenue Bonds, Series B of 2007 (the Harrisburg University of Science and Technology Project) in the aggregate principal amount of $87,915.000 (together, the “Bonds”). Reference is made to the Indenture and to the Loan Agreement (the “Loan Agreement”), dated as of January 1, 2007, pursuant to which the Authority loaned the proceeds of the Bonds to The Harrisburg University of Science and Technology (the “University”). The Authority assigned all of its rights in, to, and under the Loan Agreement to the Trustee. Capitalized terms not defined herein have the meanings ascribed to them in the Indenture and the Loan Agreement.

Events of Default.

The Trustee previously notified Holders of the failure by the University to make the March 1, 2013 and September 1, 2013 Debt Service Payments. Following discussion between the Trustee and Holders, the Debt Service Reserve Fund was not utilized to make the March 1, 2013 or September 1, 2013 payments and those payments were not paid to Holders.

Additionally, pursuant to section 4.2 of the Loan Agreement, the University was required to make a Loan Payment to the Trustee in the amount of $1,806,750 at least seventy-five (75) Business Days prior to March 1, 2014. The University failed to make that payment. Such failure constitutes an Event of Default under section 7.1(a) of the Loan Agreement and section 6.1(e) of the Indenture. As a result of the failure by the University to make the required Loan Payment, the Trustee requested payment from the County under the Guaranty and Credit Support Agreement in the amount of $1,500,000, which is the maximum amount that may be requested during any one calendar year. Such funds are to be received from the County not later than three days prior to the March 1, 2014 Debt Service Payment Date.

Parking Garage Transaction.

As security for the performance of the obligations of the University under the Loan Agreement, the University entered into an Open-End Mortgage and Security Agreement (as amended, modified, or supplemented from time to time, the “Mortgage”), pursuant to which the University granted to the Trustee a security interest in and mortgage on the Mortgaged Property, including the Land, Building, Property, and Parking Unit (all as defined in the Mortgage).

The University entered into an Agreement of Sale and Purchase, dated as of January  , 2007, with the Harrisburg Parking Authority (“HPA”) wherein, inter alia, the University represented that the University intended to submit the Property to a condominium form of ownership and agreed to sell to HPA one condominium unit (the “Parking Unit”) within the Mortgaged Property, to consist of seven floors of parking facilities to include 392 parking spaces, for a purchase price of $14,000,600. Such purchase price (except for a payment related to certain change orders on construction of the building) was paid and thereafter used, along with proceeds of the Bonds, to construct the Building.

In mid-2013, HPA demanded that the University deliver a deed conveying the Parking Unit free and clear of all mortgages and liens, including the Trustee’s Mortgage. The Trustee advised HPA and the University that, under the terms of the Mortgage, the Trustee had no obligation to release its lien so long as any Event of Default existed. As a consequence of existing Events of Default, the Trustee refused to release its lien on the Parking Unit.

Following discussion with the Holders, the Trustee entered into negotiations with HPA regarding payment to be made by HPA to the Trustee in return for the Trustee releasing its Lien upon the Parking Unit. With the agreement of a majority of the Holders, the Trustee agreed to release its lien on the Parking Unit upon payment to the Trustee of $3,600,000. On December 23, 2013 the Trustee received payment from HPA in the amount of $3,600,000, whereupon the Trustee released its lien on the Parking Unit. The Trustee retains its lien on all other property subject to the Mortgage.


As noted below, an interest payment in the amount of $3,613,500 will be made to Holders. The Trustee has assigned January 19, 2014 as the record date (the “Special Record Date”) and January 29, 2014 as the payment date for this Distribution to Holders. Holders of the Bonds as of the Special Record Date will receive the following distribution of the proceeds:

.CUSIP Outstanding Principal Aggregate Interest Distribution per CUSIP 41473XAB5 Rate Per $1,000

Outstanding Principle $60,225,000 Aggregate Interest Distribution per CUSPID $3,613,500 Rate Per $1,000 $60.00

The Distribution of funds will be applied to the missed payments for March 1, 2013 and September 1, 2013. The sources of the Distribution are the $3,600,000 the Trustee received from HPA and an additional $71,000 the Trustee received from the University on December 30, 2013.

Following the Distribution, the University will remain in default of its obligation to make a Loan Payment in the amount of $1,806,750.

Forbearance Agreement.

After discussion with Holders, the Trustee entered in negotiations with the University on a forbearance agreement. With the consent of a majority of the Holders, the Trustee entered into such an agreement on December 6, 2013. The agreement requires, among other things, that the University pay the Trustee the amount of $71,000 per month. The Trustee received the first payment of $71,000 on December 30, 2013.

As stated above, the University remains in default of its obligations. The Trustee and Holders of a majority in aggregate principal amount of the Bonds are in continuing discussions with the University on matters relating to the Bonds.

Additional Information.

The Trustee intends to issue periodic notices to Holders regarding certain matters relevant to the Bonds. Holders should not rely on the Trustee as their sole source of information.

Certain disclosure documents with respect to the Bonds have been posted to the EMMA service and are available free of charge. The Trustee is not responsible for the maintenance or accuracy of the EMMA Service and makes no representations or warranties with respect thereto.

The Trustee has been in consultation with the majority Holders regarding matters relating to the Bonds. Any Holders wishing to participate in these consultations with the Trustee, wishing to receive expedited communication, or having questions regarding this notice are encouraged to contact the Trustee. You may contact the Trustee, Mark Heer directly by e-mail: or through the Trustee’s counsel, EricA. Schaffer, at The Trustee will not share any bondholder information delivered via this disclosure unless agreed to by the Holder. The Trustee may conclude that a specific response to particular inquiries from individual Holders is not consistent with equal and full dissemination of information to all Holders. The Trustee makes no recommendations and gives no investment or tax advice. If any Holder has not contacted the Trustee, such Holder is asked to do so.

UMB BANK, N.A., JANUARY 9, 2014 As Trustee *The Trustee is not responsible for the selection or use of this CUSIP. It is included solely for Holder convenience.

US_ACTIVE-115954344.2 01/09/2014 2:35 PM

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