There’s been some rumbling in the blogosphere about this topic for the last day or two, but we’ve just been directed to some information we can blog about. Our information source is this: Bond Information for the Ark Encounter Project. It’s a separate website presumably set up by Ken Ham (ol’ Hambo).
We assume that this new website was created to keep it legally apart from Hambo’s on-line ministry, Answers in Genesis (AIG), which owns and operates the infamous, mind-boggling Creation Museum. It’s also separate from the newly-revised website for Hambo’s proposed Ark Encounter project.
Our last post about the financial problems for Hambo’s Ark was Ken Ham Keeps Getting Pounded. Ol’ Hambo was upset about news stories claiming that he was having problems raising the $73 million he was seeking for the project.
That’s enough background. Let’s dig into what’s presented at the new website for the bonds. Here’s what we’re told:
Please note that the materials provided on the website are for informational purposes only and do not constitute an offer to sell or the solicitation of an offer to buy any securities. The bonds will be offered by means of a formal bond offering and in accordance with Federal and State securities laws.
Investment in Ark bonds is not appropriate for everyone and entails a level of risk. The Ark bonds will be secured solely by the Ark Encounter project and will not be an obligation of Answers in Genesis. You should consult with your personal financial advisors regarding any investment in the Ark bonds.
That stuff was obviously drafted by lawyers. That’s because in the US, it’s illegal to offer “securities” (stocks, bonds, etc.) unless the offer has been registered with the Securities and Exchange Commission (the SEC), and the offer must be accompanied by a prospectus that has been approved by the SEC. Let’s continue:
You may view an executive summary of the Ark Encounter project that provides an overview of the vision for the project and preliminary information about the bond offering.
Here’s a link to the executive summary. It’s a 4-page pdf file that takes a while to load, not only because of the pictures of Noah’s Ark, but because the whole thing is a graphic, including the text, so it’s not easy to copy and paste excerpts. We’ll get to it, but first, let’s see what else the main website says:
It is anticipated that the bonds will be available for purchase over a six week period until closing on or around December 19, 2013. In order to access information about the Ark bond offering and to receive notice of the release of the formal bond offering documents, you will need to register [link omitted].
Once you register, you will be able to view/download these documents:
• Bond Term sheet
• Frequently asked questions (FAQs)
• Preliminary Official Statement (POS)
This looks like it’s a private placement, which is a technical exception to the registration requirements of the SEC. The typical private placement that we hear about is a transaction in which a venture capital firm invests in the stock of a budding company, hoping to get in on the ground floor and nourish its growth until it’s ready to go public. But in this case it’s bonds.
The sale of securities in a private placement is still subject to the anti-fraud provisions of the SEC, but if the securities are offered and sold only to “accredited investors” with a specified minimum net worth who can evaluate the risks and who are financially sophisticated, then the issuer of the securities can avoid a load of the SEC’s bureaucratic requirements. But although the securities can be sold to another private investor, you can’t take them to your broker to sell them. They can’t be publicly traded until they’re registered — if they ever are.
The last information at the website is this:
The bond issuer will be the City of Williamstown, KY and the co-borrowers will be Crosswater Canyon, Inc., a non-profit organization controlled by Answers in Genesis, and Ark Encounter, LLC (co-borrower; solely owned by Crosswater Canyon, Inc.).
A city is issuing the bonds? That’s a curious arrangement. And we’re not surprised to see that when the bonds are sold, the borrowers of the money will be companies controlled by AIG.
Okay, let’s take a peek at the “executive summary.” We assume this is the only other official information one can get, unless he registers with the people selling the bonds and demonstrates that he’s an “accredited investor.” They first give some fluffy information about AIG, the Creation Museum, and the wondrous Ark project they intend to build. Then it gets serious.
We’re told that the bonds won’t be rated by any rating agency. That means they won’t have any credit rating. They’ll be issued in four different maturities, and can be bought as follows: 7-year bonds, interest rate 5.25%, minimum purchase $250K; 9-year bonds, interest rate 5.5%, minimum purchase $100K, 11-year bonds, interest rate 5.625%, minimum purchase $50K, and 15-year bonds, interest rate 6%, minimum purchase $5K.
Oh, this is interesting. Even though a city will be technically the issuer of the bonds, the interest will be taxable. So the bonds are definitely not what are commonly known as tax-free municipals. And this is also interesting. It says that the bonds won’t be an obligation of AIG, and won’t be secured by any revenues or assets of AIG. The only security for the bonds will be the revenues and assets of the Ark project itself. We assume (but we aren’t specifically told) that the City of Williamstown won’t be on the hook either.
That’s the only information we’re given about the bonds. It’s probably sufficient for potential investors to decide if they want to go further and register for the information that will be provided only to “accredited investors.”
So there you are, dear reader. If you’re interested, proceed at your own risk.
Addendum: We were wondering how much the total of the bond offering is. We read the executive summary again. It’s not as clear as we’d like, but it says:
COST: $73 million, initial phase $52.6 million in projected future phases over the first 10 operating years.
FUNDING: $13 million already provided from AIG through donations raised, and remaining funds from pending bond offering and AIG (through its donation campaign). Future phases will be funded through future earnings.
As we read that, they’re concerned here only with the initial phase of $52.6 million, because future earnings will take care of the rest. Subtract $13 million already contributed to AIG, and that leaves $39.6 million to be raised from sale of the bonds and from future donations that may be received by AIG. Make of that what you will.
See also: Bloomberg Reports on Ken Ham’s Ark Bonds.
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