Last week, Alameda Power & Telecom announced a deal to sell their Telecom division to Comcast for a nominal offer price of $17 million. They also announced that the City of Alameda is in litigation with holdout bondholders who refused to assent to the sale. $20 million hangs in the balance.
Nuveen Asset Management, Inc. manages the Nuveen Municipal High Income Opportunity Fund and the Nuveen Municipal Trust, which bought over $20 million of the 2004 bonds that AP&T issued to re-finance the Telecom division. Nuveen wants their money back. Although Nuveen represents only 5% of the bondholders by number of bondholders, it seems that they represent 61% of the bondholders by face value of the $33 million of bonds issued.
Attorney’s for Nuveen, (technically, the attorney’s represent the Nuveen Municipal High Income Opportunity Fund and the Nuveen Municipal Trust series Nuveen High Yield Municipal Bond Fund) claim that AP&T, the City of Alameda, and their agents who sold the bonds to Nuveen did not fully disclose all the risks associated with the bonds, and in fact mis-led Nuveen about the City’s intention to operate the Telecom division to profit, to re-pay the bonds. Attorney’s for the City of Alameda assert that Nuveen was aware of all the potential risks. The litigation is playing out in the United States District Court Northern District of California, San Francisco Division.
See Nuveen’s counterclaim against the City of Alameda, including their accusations of false and mis-leading statements by the City and their agents, here.