E. Replacement Tenant
The analysis of terminal operations presented in Section VI of this Report assumes that the Lessee will continue to operate T18 under the Terminal 18 Lease. Conditions that would constitute Lease Default Event, as defined in the Bond Resolution, include the occurrence of any of the defaults identified in Section 8.1 (i), (ii), (vi) and (vii) of the Terminal 18 Lease, a payment default under the Crane Agreement, delivery of written notice by the Port to the Tenant and the Trustee that a default specified under Section 8.1 (iii) or (v) of the Terminal 18 Lease has occurred, or the delivery by the Port of written notice to the Tenant that the Terminal 18 Lease is being terminated pursuant to Section 8.2 thereof.
In the event of a Lease Default Event, the Port may forestall termination of the Leaseback for up to two years in the following manner. If the Lease Default Event has occurred as a result of a failure by the Tenant to pay Rent in accordance with the terms of the Terminal 18 Lease, the Port can pay an amount sufficient together with other T18 Revenue on deposit in the T18 Revenue Fund to make necessary payments outlined in the Bond Resolution. The Port must take actions that the Port deems appropriate to collect the maximum amount of Pledged Revenue from the Tenant. If the Terminal 18 Lease is terminated for any reason, the Port, under the Bond Resolution, has the right to use its best efforts to secure a Subsequent Tenant and to enter into a Subsequent Lease and a subsequent Crane Agreement having terms substantially similar to the terms of the Terminal 18 Lease and the Crane Agreement. The Port must also maintain T18 or cause T18 to be maintained and provide written assurance to the Trustee and the 1999 Bond Insurer that the Port will continue to maintain or cause T18 to be maintained in accordance with the covenants of the Bond Resolution.
The Terminal 18 Lease also outlines the remedies available in the event of a major default. If the Terminal 18 Lease were terminated, the Port has under the Resolution the option to either take over operations of T18, or to find a replacement tenant.
In addition, a Reserve Fund, consisting of a Debt Service Reserve Fund funded with Bond proceeds, and a Surety Bond required of the Lessee, are available for the purposes of making debt service payments during a transition period. Interest accrued is required to remain in the Debt Service Reserve Fund, allowing the fund to grow each year.
In the event the Port secures a replacement tenant, the Port could choose to enter into agreements that result in rent payments that are less than those required under the Terminal 18 Lease, but only if such agreements are acceptable to the Trustee and the 1999 Bond Insurer. However, such negotiated rent payment would have to be adequate to cover the requirements of the Bond Resolution. Exhibit 9 presents a calculation of the minimum required revenue that would be allowed while still meeting the requirements of the Bond Resolution. As shown in Column 8 of the exhibit. T18 revenues could be substantially decreased and still meet the obligations as set forth in the Bond Resolution.
