in trust instruction proceeding to the holdersi of …

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March 4, 2019

SUPPLEMENTAL NOTICE OF FILING OF COURT ORDERIN TRUST INSTRUCTION PROCEEDING

TO THE HOLDERSI OF

ILLINOIS FINANCE AUTHORITYSPORTS FACILITY REVENUE BONDS(LEAFS HOCKEY CLUB PROJECT)

$18,880,000 Series 2007A$1,120,000 Taxable Series 2007B

CUSIP Numbers:2

45202UAF145202UAG945202UAH745202UAJ3

UMB Banlc, N.A. (the "Trustee") acts as trustee pursuant to the Trust Indenture betweenIllinois Health Facilities Authority as issuer (the "Issuer") and its predecessors as trustee, dated asof Februaxy 1, 2007 (the "Indenture"). The above-referenced bonds (the "Bonds") were issuedpursuant to the Indenture. The proceeds of the Bonds were loaned to LHC, LLC, an Illinois non-profit limited liability company (the "Borrower"), for the construction and operation of a hockeyarena (the "Facility") located in West Dundee, Illinois. The repayment of the Bonds wasguaranteed by Leafs Hockey Club, Inc., an Illinois non-profit corporation (the "Hockey Club").The Hockey Club is the sole member of the Borrower.

The Trustee previously provided notice to holders of the entry of Findings of Fact,Conclusions of Law and Order dated February 14, 2019 ("Order") by the Probate Court forHennepin County, Minnesota instructing the Trustee to proceed with the sale of the Facility at

1 This notice contains important information that is of interest to the beneficial owners of the subjectsecurities. If applicable, all depositories, custodians, and other intermediaries receiving this notice arerequested to expedite transmittal to such beneficial owners in a timely manner.

2 CUSIP numbers are provided for convenience of reference only. No representation is made as to the accuracy ofthe CUSIP numbers contained in this letter, although a good faith effort has been made to insure that CUSIPnumbers are correct.

To the holders of Leafs HockeyArena BondsMarch 4, 2019

auction. This notice supplements the prior notice by providing copies of the orders of the Court.

The prior notice also infoi7ned holders that the bid deadline is March 5, 2019. Please note however

that the auction will now take place on March 14, 2019 and not on March 19, 2019.

Pursuant to Minn. R. Civ. App. P. 104.01, enclosed and served upon you is a copy of the

Order attached as A~~endix I to this Notice. Holders are advised to review the attached Order

carefully for a complete description of the relief granted therein. To the extent that there are any

inconsistencies between this notice and the attached Order, the Order shall control. Attached

hereto as Appendix II is a notice filed with the Court indicating that the Order was docketed on

February 14, 2019.

Any holder who has any questions concerning the Bonds or this notice should contact the

Trustee at the following address:

Virginia Anne Housum, Senior Vice PresidentUMB Banlc, N.A., as trustee120 South Sixth Street, Suite 1400Minneapolis, MN 55402Email: [email protected]: (612) 337-7003

The Trustee makes no recommendations and gives no investment advice herein or as to

the Bonds generally.

UMB Bank, N.A., as Trustee

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27-TR-CV-19-4 Filed in District CourtState of Minnesota2/27!2019 1:19 PM

STATE OF MINNESOTA DISTRICT COURT

COUNTY OF HENNËPIN FOURTH JUDICIAL DISTRICTPROBATE/MENTAL HEALTH DNISION

CASE TYPE: OTHER CIVIL

In the Matter of the Trusteeship Under theIndenture of Trust between the IllinoisFinance Authority and UMB Bank, N.A., asSuccessor Trustee

BALL~IRD SPAFIR, LLP

PLEASE Tr1I~E NOTICE that the attached Findings of Fact, Conclusions of Law and

Order was filed by the Court in this matter on February 14, 2019.

Dated: February 27, 2019

By: /s/ William P. Wassweiler

Court File No.: 27-TR-CV-19-4

NOTICE OF FILING OF FINDINGS OFFACT, CONCLUSIONS OF LAW AND

ORDER

William P. Wassweiler80 South Eighth Street2000 IDS CenterMinneapolis, MN 55402-2100Telephone: (612) 371-3211

Attorney for IJMB Bank, N.A., as Successor Trustee

DMNORTH #6754609 vl

27-TR-CV-19-4

27-TR-CV-19-4

STATE OF' MINNESOTA

COUNTY OF HENNEPIN

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DISTRICT COURT

FOURTH JUDICIAL DISTRICT

PROBATE/MENTAL HEALTH DIVISION

In the Matter of the Trusteeship Under the

Indenture of Trust between the Illinois

Finance Authority and UMB Bank, N.A., as

Successor Trustee

Court File No.: 27-TR-CV-19-4

FINDINGS OF FACT, CONCLUSIONSOF LAW AND ORDER

The Court held a hearing on February 13, 2019, on the Petition of UMB Bank, N.A.

("UMB"), as successor trustee (the "Trustee")' of the above-described trust (the "Trust"), for an

order pursuant to Minn, Stat. §501 C.0202 seeking instructions relating to the administration of the

Trust. William P. Wassweiler, Esq, of Ballard Spahr, LLP appeared on behalf of the Trustee. The

matter was referred for hearing to George Borer, District Court Referee, who now reports to the

Court making the following recommended Findings of Fact, Conclusions of Law and Order:

FINDINGS OF FACT AND CONCLUSIONS OF LAWS

A. Petitioner, Jurisdiction, Venue and Notice

1. UMB is the duly-appointed, qualified and acting Trustee under the Indenture.

2. tTMB's trust office is located at 120 South Sixth Street, Suite 1400, Minneapolis,

MN 55402.

3. The Trustee has invoked the Court's jurisdiction as a proceeding in rem. Pursuant

to Minn, Stat, §§501C,0202 and SO1C.0207, the Court has jurisdiction of the subject matter and

venue is proper in Hennepin County, Minnesota.

~ Capitalized terms used herein and not otherwise defined shall have the meanings given them in the Petition.

2 To the extent any of tha following findings of fact constitute conclusions of law, they are adopted as such, To the

extent any of the following conclusions of law constitute findings of fact, they are adopted as such,

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4. Furthermore, based on the affidavits ofpublication and mailing filed with the Court:

(i) due and proper notice of the hearing on the Petition was provided to the Trust's beneficiaries

and other interested parties, as required by the Court's January 11, 2019 Order for Hearing on

Petition of UMB Bank, N. A., as Successor Trustee for an Order Pursuant to Minn. Stat.

§SO1C.0202 in the Administration of a Trust; (ii) the time required for notice has expired; and (iii)

the proceeding was commenced within the time limitations prescribed by the Minnesota Trust

Code.

5. No objection was filed or raised at the hearing on the Petition to the relief requested

in the Petition,

B, The Bonds

6. The bonds at issue here consist of a series o£ (i) Sports Facility Revenue Bonds

(Leafs Hockey Club Project), Series 2007A in the aggregate original principal amount of

$18,800,000 (the "Series 2007A Bonds"); and (ii) Sports Facility Revenue Bonds (Leafs Hockey

Club Project) Taxable Series 2007B in the aggregate original principal amount of $1,120,000 (the

"Series 2007B Bonds," and together with the Series 2007A Bonds, the "Bonds").

7, The Issuer loaned the proceeds of the Bonds to the Borrower pursuant to a Loan

Agreement dated February 1, 2007 ("Loan Agreement") by and among the Issuer, the Borrower,

and the Hockey Club

8. Proceeds of the Bonds financed the cost of acquiring land and constructing and

equipping an ice hockey facility, which includes an approximately 105,600 square foot ice skating

arena with three sheets of ice located in West Dundee, Illinois (the "Facilit "). Proceeds of the

Bonds were also used to pay interest on the Bonds during construction and for a period of time

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after completion of the Facility, to fund a debt service reserve, and to pay the costs of issuing the

Bonds.

9. Repayment of the Bonds was guaranteed by Leafs Hockey Club, Inc., an Illinois

non-profit corporation (the "Hocke~Club"), the primary usex of the Facility and the sole member

of the Borrower.

10. As of January 15, 2019, the total amount of unpaid principal due on the Bonds is

$20,000,000.00 as follows: (i) Series 2007A Bonds - $18,880,000.00; and (ii) Series 2007B Bonds

- $1,120,000.00. In addition to accrued and unpaid interest due on the Bonds, the Trustee has

incurred fees and expenses, including fees and expenses of its counsel in connection with its pursuit

of remedies under the Indenture.

C, Prior Defaults and Borrower's Bankruptcy Filing

11. In 2008, the Borrower defaulted under the terms of the Loan Agreement based on

its failure to make debt service payments. In September 2012, the Trustee demanded that the

Hockey Club pay the then-existing payment shortfall to holders of the Bonds ("Bondholders"),

along with the amount needed to replenish the Debt Service Reserve Fund. The Hockey Club

failed to comply with the Trustee's demand.

12, In December 2012, without the Trustee's prior knowledge, the Hockey Club

removed the members of the Borrower's Board of Managers and replaced them with new managers

selected by the Hockey Club. The Hockey Club also locked out the management company that

was operating the Facility and alleged misconduct on the part of the management company.

13. On December 27, 2012, the Trustee declared all of the principal and interest

outstanding under the Loan Agreement and the Bonds to be due and payable. The Trustee also

commenced a forensic investigation of the Borrower and the Hockey Club. In addition, the Trustee

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commenced lawsuits against the Borrower and Hockey Club, including proceedings to foreclose

the Mortgage and appoint a receiver for the Facility.

14. On February 25, 2013, the Borrower filed a petition under Chapter 11 of the

Bankruptcy Code in the Bankruptcy Court for the Northern District of Illinois. Thereafter, the

Prior Trustee filed a motion for the appointment of a Chapter 11 trustee (the "Motion"), Although

the bankruptcy filing stayed the then-pending actions against the Borrower and the Facility, it did

not stay the pending action against the Hockey Club ("Guarantor Action").

D. Prior Trust Instruction Proceeding Authorizing the Trustee to issue Trustee

Certificates to Fund the Ongoing Cost of Enforcing the Rights of Bondholders

15. By August, 2014 the Trustee was indebted to its financial advisor and counsel to

the extent of approximately $3 million for fees and costs relating primarily to pursuit of the Motion

and Guarantor Action, with insufficient funds in the Trust Estate to pay the professionals. In order

to raise funds to pay for and retain the services of the Trustee's professionals, the Trustee proposed

the issuance of trustee certificates ("Trustee Certificates"},

16. On August 22, 2014, the Trustee filed a petition for trust instructions with this

Court, followed by an Amended Petition dated September 25, 2014 (Court File No. 27-TR-CV-

14-186), With the Amended Petition, the Trustee set forth the various defaults that had occurred

under the Loan Agreement and Indenture, and sought the Court's approval and authorization to

sell $5.1 million of Trustee Certificates to Extei~na Funding, LLC (the ̀ Bxterna Transaction") to

enable the Trust Estate to pursue the remedial and enforcement actions against the Borrower and

the Hockey Club that the Trustee deemed necessary in order to protect the interests of the

Bondholders.

17. On October 16, 2014, this Court entered an Order (the "2014 TIP Order") approving

and authorizing the Trustee to enter into the Externa Transaction, and determining that the

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Trustee's "past and proposed actions in the administration of the Trust and the Trust Estate as

described in the Petition .. ,are consistent with the terms of the Indenture and the Trustee's duties

and obligations to the holders of the Bonds." (2014 TIP Order at ~4.)

1 S. Before payments can be made on the Bonds, the Trustee Certificates owned by

Externa must be redeemed through the payment of principal and interest. The current interest rate

on the debt to Externa is 11 % per annum. The interest rate owed to Externa on the Trustee

Certificates was voluntarily reduced after negotiations with the Trustee from 15% to 11 %per year,

effective April 1, 2017.

19. As of January 15, 2019, the outstanding principal and interest due and owing on the

outstanding Trustee Certificates is $5,029,429.29.

E. The Hockey Club's Bankruptcy Filing, Settlement and Conveyance of the

Facility to Trimalchio

20. On May 24, 2015, the U,S, District Court for the Northern District of Illinois

entered judgment in favor ofthe Trustee in the Guarantor Action in the amount of $24,526,111.57

(the "Judgment"). Since the Hockey Club lacked the resources to pay the Judgment, the Trustee

commenced negotiations to obtain a deed in lieu of foreclosure from the Hockey Club.

21. When negotiations broke down in early July, 2015, the Hockey Club filed

bankruptcy under Chapter 11 of the U.S. Bankruptcy Code on July 7, 2015,

22. By December, 2015 the Trustee was able to successfully negotiate a settlement

whereby the U,S. Bankruptcy Court in both the Borrower's and the Hockey Club's bankruptcy

cases entered orders approving the parties' motions to convey the Facility to a special purpose

entity created by the Trustee, Trimalchio Hockey Arenas, LLC ("Trimalchio"),

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23. Trimalchio has owned and operated the Facility under the name Leafs Ice Centre

since December 2015. Since that time, the Facility has been managed by Fairview Facilities

Management, LLC.

F. Stalking Horse Bidder and Auction Process for Sale of the Facility

24. In 2018, Trimalchio, through actions of the Trustee, retained Certus Financial

Advisors, LLC ("Certus") to sell the Facility. Previously, the Trustee had been contacted by

several potential buyers of the Facility, all of whom provided offers that were too low to be

considered by the Trustee. The names of those potential buyers were provided to Certus. Certus

did extensive due diligence on the Facility to understand the soundness of the operations in order

to refute claims from the market intended to depress asset valuation and likelihood of a successful

sale. Certus set up a confidential data room with historical financial information, budgets,

engineering data, operations detail, title, and market information about the Facility, Certus met

with the current management company, representatives of Leafs Hockey Club, and larger tenants

to determine their long-term intentions with respect to continuing to lease the Facility for their

program needs and to build a rapport with key users given the insolvent history of the Facility.

Based on the information compiled, Certus prepared a confidential information memorandum (the

"CIM"), much like a prospectus for the purchase of a business, which was to be made available to

qualified potential buyers who signed a confidentiality agreement with respect to the information

in the data room.

25. Certus then began marketing the Facility for sale, and on January 8, 2019, following

extensive negotiations, Trimalchio entered into the Purchase and Sale Agreement with the

Qualified Bidder, who has agreed to act as the stalking horse to attract higher offers, The Purchase

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and Sale Agreement is attached to the Petition as Exhibit D and is pant of the record in these

proceedings.

26. Pursuant to the Purchase and Sale Agreement, Canlan Ice Sports (USA) Corp,, as

the Stalking Horse Bidder, has agreed to set a minimum price for the Facility of $10,000,000 (the

"Stalking Horse Bid"), subject to overbids (each referred to as a "Toppin~Bid") submitted by

other potential bidders at an auction to be held sometime in the future (the "Auction").

27. The Purchase and Sale Agreement also provides that the Qualified Bidder will be

paid a breakup fee of $200,000, if it is not the successful bidder at the Auction. If the Qualified

Bidder's bid is deemed the highest and best bid at the Auction, then the breakup fee will be

unearned.

28. In exchange for the prevailing purchase price of at least $10 million, Trimalchio

will convey to the highest bidder the real property, equipment, personal property, contracts, and

other intangibles constituting and relating to the Facility, as more fully described in Section 1 of

the Purchase and Sale Agreement. Trimalchio will retain its cash, receivables, and records, as

more fully described in Section 1 of the Purchase and Sale Agreement,

29. Section 3 of the Purchase and Sale Agreement provides for an additional 60-day

period of time after execution of the Purchase and Sale Agreement in which Trimalchio "is

authorized to begin formally marketing the Property for sale at Auction." Trimalchio shall sell the

Facility to the highest bidder at the auction, except that Trimalchio shall not accept a bid from a

party other than the Stalking Horse Bidder at the auction that is less than $10,225,000. Any third-

party bid must also agree to purchase the Facility from Trimalchio on substantially the same terms

as those provided for in the Purchase and Sale Agreement.

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30. The Purchase and Sale Agreement and auction process are best suited to find and

obtain the highest and best purchase price for the Facility.

31, Minn. Stat. § SQ1C.0204 authorizes this Court to make an order it considers

appropriate upon hearing a petition filed under Minn. Stat. § 501 C.0202. Such an order is final as

to all matters determined by this Court and binding in rem upon the Trust and upon the interests

of all beneficiaries, vested or contingent, even though unascertained or not in being.

32, The sale of the Facility through the auction process contemplated by the Purchase

and Sale Agreement is in the best interest of all Bondholders and an order under Minn. Stat.

§ 501C.0204 is warranted. Moreover, in light of the series of events set in motion by the

Bankruptcy Filings and transfer of the Facility to the Trustee's special purpose entity, there is no

alternative course of action or other remedy that would maximize the value of the Facility, other

than the sale under the terms of the Purchase and Sale Agreement.

33. Pursuant to Minn. Stat. §SOlC.0305, the Court undertakes to represent all parties

in interest who are unascertained or whose identity is unknown to the Trustee.

~~~

IT IS HEREBY ORDERED:

1. The Trustee's execution and delivery of the Purchase and Sale Agreement is

approved and confirmed, as being in the best interest of Bondholders, and that such course of

conduct by the Trustee is prudent, authorized and permitted under the Indenture and related Bond

Documents.

2, The Trustee and Trimalchio are authorized to discharge, release and otherwise

cancel their right, title, claims, liens and interests in and to the Facility, consistent with the terms

of the Purchase and Sale Agreement, and that said actions by the Trustee are in the best interest of

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Bondholders and consistent with the terms of the Indenture, and that the Trustee's actions comply

with all applicable duties of the Trustee and are fully authorized and protected by the Indenture

and related Bond Documents.

3, The Trustee is authorized and instructed to take such further actions as are

consistent with and reasonably necessary to effectuate the transaction contemplated by the

Purchase and Sale Agreement, including the auction process provided for therein.

4. The Trustee's consent to the sale of the Facility pursuant to either (i) the terms of

the Purchase and Sale Agreement with the Qualified Bidder, or (ii) any subsequent sale agreement

with a third party on substantially the same terms as the Purchase and Sale Agreement in the event

of a higher bid at the auction, is in the best interest of Bondholders and consistent with the terms

of the Indenture, and all of the Trustee's actions described herein comply with all applicable duties

of the Trustee and are fully authorized and protected by the Indenture, and related Bond

Documents, and shall not subject UMB Bank, N. A., individually ox as Trustee, to liability.

5. The application and disfiribution of all moneys held or to be received by the Trustee

upon the sale of the Facility are consistent with the terms of the Indenture, and The Trustee is

authorized and instructed to apply and distribute such moneys as provided for therein, including

without limitation first to the fees and expenses of the Trustee and Trimalchio, expenses necessary

to effect the auction and sale, and to satisfy the indebtedness due and owing under the Trustee

Certificates.

6. Upon distribution of all funds held by the Trust Estate, the Trustee is authorized

and instructed to cancel the Bonds for all purposes and terminate the Trust Estate.

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7. The Trustee's past and proposed actions in the administration of the Trust axe

consistent with the terms of the Indenture and the Trustee's duties and obligations thereunder to

all Bondholders.

8. The Trust and Trustee shall not be subject to the continuing supervision of the Court

for purposes of Minn. Stat. §SO1C.0205 or General Rule or Practice 417.02.

Order Recommended by: SY TIC COURT;.

,~~^ ~~~"' ~~-'

surer, ceo~ye CLney Eli~aban

Peb 113019 6;44 AM Feb t4 2019 9:58 Ahi

Referee of District Court Judge of District Court

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