DATE: October 26, 2017
TO: Members of the Economic Development Authority
FROM: Nate Carlson, Economic Development Coordinator
Chris Heineman, Community Development Director
Title
EDA Consideration of Resolution #2017-02 Third Loan Modification for StrataPoint
Body
SUMMARY AND ACTION REQUESTED:
EDA Board shall review EDA Loan Sub-Committee recommendation and approve resolution #2017-02 to approve Third Loan Modification for StrataPoint Master Development Loan.
BACKGROUND:
In 2009, the EDA recommended that City Council approve a Master Development Loan of $50,000 to StrataPoint, Inc. at a rate of 3.25% (WSJ Prime as of loan start date) amortized over 60 months (Resolution #2009-041). The company made timely payments through April 30,, 2013. However, the company experienced financial hardships and notified its creditors that further payments on their financial obligations would not be feasible, and they requested alternate payment arrangements.
With a balance of $14,999.75, the EDA passed Resolution #2013-08 on April 25, 2013 requesting the City Council modify the loan arrangement to interest-only payments for a 24-month period. Council approved the modification stating StrataPoint, Inc. was granted 24 months of interest-only payments at a rate of 3.625% of the outstanding balance, which correlated to $46 monthly payments. This first modification ended on May 7, 2015.
Following the end of the first modification in 2015, staff presented a second modification of the loan in April 2015 to the EDA Board extending the interest-only payments for an additional two years. The EDA Board approved the amendment and provided recommendation to Council. City Council also approved the second modification (Resolution #2015-075). This second modification ended July 2017.
After correspondence with StrataPoint, Inc. leadership, staff has concluded that the company continues to experience financial hardship. Rather than extend the interest-only payments an additional two years, staff has negotiated a restructuring of the loan, which will resume principal and interest payments made by the borrower.
The negotiated loan terms are as follows:
• Principal Balance: $14,999.75
• 1% interest
• 15-year amortization
• 5-year term with balloon payment
• Monthly payment of $89.77
• Balloon payment of $10,247.56 after the 5-year term
• No collateral offered (Borrower unwilling to execute Promissory note or Personal Guarantee)
The supplementary documents included are as follows:
• Modified Loan Agreement - DRAFT
• Amortization schedule
• City Council Resolution #2015-075
The EDA Loan Sub-Committee met on October 18th to review the submitted application. The minutes of the meeting are attached. Committee members have made the following recommendation to the EDA Board:
“The EDA Loan Committee will make a recommendation to the EDA Board to approve the terms of the Third Loan Modification for the Master Development Loan to StrataPoint and provide City Council with recommendation to approve the terms.”
ANALYSIS:
StrataPoint, Inc. has benefited from the original Master Development Loan since first received in May of 2009. The First and Second Modifications allowed the business to maintain a level of operation. Through the established partnerships and the perseverance of Chairman and CEO, StrataPoint, Inc. continues to operate at a minimal level.
OPTIONS:
EDA Board has the following options to consider:
1) Approve Committee recommendation and approve Resolution #2017-02
2) Request further information from borrower to review at a follow-up loan committee meeting
3) Recommend Modification to be unapproved
RECOMMENDATION:
Staff recommends approval of EDA Resolution #2017-02.