National City Bank would not make the $6,000,000.00 loan to FireFly without the City/County guaranteeing the loan. "Under the proposal, National City Bank will provide FireFly Energy with a five year loan for the $6 million secured by $4 million in equipment. the remainder of the funds would be used for working capital. The first three years would be interest only paid monthly. (I don't know how much interest, if any, $300,000 per year, is past due) and the last two years provide for a small amount of amortization."
"The loan would first be secured by the equipment in event of default, then by the $1million in Keystone money (another brighter story) placed in a reverse fund by the county. Any loss would be shared 41.07% by the County and 58.93% by the City. The City's guarantee is pledged with $3.3 million in utility tax revenues. The County's guarantee is the $1 million in Keystone money and $2.3 million in Personal Property Replacement Tax. The total guarantee is $6.6 million for accrued interest during any potential default period." Taken from May, 31, 2007 Tax/EDC Minutes.
Will any money be collected by either the City of the County? The answer is probably not as the bank has no worry, they let the gullible taxpayer do the worrying, any leaser plus anyone who stands next in line before the C/C.
See my next blog on the alleged FireFly bankruptcy.