An Asset Coverage Test Determines a Company’s Ability to Cover Debt Obligations with its Assets after ALL LIABILITIES have been Satisfied.
John Knox, from the Law Firm of Orrick Herrington, was paid $900/hr to stand before the Beaumont City Council and claim that if the City of Beaumont’s ‘Expert Staff’ would forge two Certificates his Law Firm of would deliver the Opinion that it was legal for the Beaumont City Council to steal the CFD Bond money and use it to pay $900/hr lawyers.
The two forged Certificates are the Certificate of Verification from the City Manager and Public Works Director that all facilities have been built, which was included in the Staff Report.
The second Certificate is the ‘Asset Coverage Test’ that the Knox stated Mike Busch from Urban Futures has already prepared. Since the Councilmen ‘looked at all the issues’ and ‘it was so hard’ surely the Councilmen read the Asset Coverage Test, right?
Judy Bingham requested a copy of the Asset Coverage Test and was told by the City that there was no Asset Coverage Test.
Did any of the Councilmen ask their Experts about the Asset Coverage Test?
‘All Liabilities’ include the $100 Million in Lawsuits pending, the Sewer Plant Compliance, the $3 to who knows how many Millions in Mello Roos Prepayments that were ‘supposed’ to be in the Bond Fund Accounts, but are not, and the $100 Million + Deficit in the City’s General Fund.
Everyone needs to start wrapping their heads around the fact that the Deficit in the General Fund is not ‘$6 – $10 Million’, it’s $6 – $10 Million every year since about 2004.
Below is the definition of an Asset Coverage Ratio and the Council Transcript from September 6, 2016. Produce the Asset Coverage Ratio Certification.
‘Asset Coverage Ratio’
The asset coverage ratio is a test that determines a company’s ability to cover debt obligations with its assets after all liabilities have been satisfied. When calculating the asset coverage ratio, investors should exercise caution with respect to asset value; using the coverage ratio of the actual liquidation value of assets is significantly less. As a rule of thumb, utilities should have an asset coverage ratio of at least 1.5, and industrial companies should have an asset coverage ratio of at least 2. Read more: Asset Coverage Ratio Definition | Investopedia http://www.investopedia.com/terms/a/assetcoverage.asp#ixzz4K4WbRm3z
Beaumont City Council Meeting Transcript September 6, 2016: http://www.ci.beaumont.ca.us/i…
40:30 Knox: The Indenture has a general provision related to residual accounts that says the Authority may, once it meets certain tests including something called an ‘Asset Coverage Test’, which is basically a test to protect the Authority’s Bond Holders.
44:20 Knox: With that and the execution of the Asset Coverage Certificate, the test that I referred to make sure that the funds held under the Indenture and the CFD Bonds that are pledged to make payments on the Revenue Bonds are sufficient to meet the Asset Coverage Test, which we have been told is true and your Financial Advisor has looked at the numbers and has provided that calculation.
45:30 Knox: We are prepared to deliver that Opinion based on the Certifications that we understand are being delivered.
46:00 Knox: There are factual Certifications that your Staff has made, which we are relying upon.