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New Business   Item #: E.
Litehouse Moral Obligation for Up Fit Financing
Business Meeting: 05/07/2020
This action will provide a moral obligation from the City of Danville to American National Bank & Trust Company to finance a project at 145 Cane Creek Boulevard, that is currently leased by the Industrial Development Authority to Litehouse Foods. The project will cover the cost of constructing an approximately 48,000 square foot, refrigerated warehouse and a wastewater pretreatment facility. American National Bank has committed a loan of $15,450,000 to cover a major portion of the project that is projected to cost approximately $19,600,000. Litehouse will provide a cash subsidy to cover the shortfall between the bank's commitment and the total cost of the project. This moral obligation agreement between the City and the Bank is the typical agreement that has been used several times in recent years to secure financing for IDA projects.
Litehouse Foods purchased Sky Valley Foods and assumed the IDA lease for property located at 145 Cane Creek Boulevard in Airside Industrial Park. The IDA currently owns this property, and it is leased to Litehouse Foods. A major product of Litehouse is refrigerated salad dressings, and to enable the company to begin manufacturing these products in Danville, a refrigerated storage facility is necessary. The total cost of the up fit project planned for the Cane Creek Blvd. facility is estimated to be approximately $19,600,000. To cover the shortfall between American National Bank's commitment of $15.45 million, Litehouse has committed to cover the shortfall up to $4.5 million and it is requested a second lien on the property to cover its participation in the overall cost. Litehouse traditionally has not owned its manufacturing facilities, but in the case of the Danville facility, it has voluntarily accepted a lease/purchase arrangement whereby the mortgage on the property is covered by the monthly rental charge plus a small service fee to the IDA. The fact that Litehouse has agreed to the lease/purchase arrangement, and further that it has agreed to supply cash funds to cover the shortfall of the up fit project cost, provide assurance that the company has solid intentions of remaining in Danville and growing its manufacturing business here to support the eastern United States market.
Staff recommends that City Council approve the attached Moral Obligation Agreement for City of Danville and the Resolution authorizing the City Manager to enter into such an agreement with American National Bank and Trust Company in the amount of $15,450,000.
Moral Obligation Agreement for City of Danville
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