Sterling, As Receiver
Kiowa had a problem: Its Water Enterprise had to issue bonds to pay for improvements to bring its water and wastewater treatment system into compliance with state and federal regulations, but with the economic downturn, the Town had not grown as expected and it could not service the bond debt. The bondholders were rightly concerned and the Town was frustrated. A state-court receivership was indicated because it could be custom-tailored to the existing operations of the Water Enterprise and would be supervised by a District Judge who lived and worked in the same community. A bankruptcy was not viable because one cannot put just part of a municipality into bankruptcy.
The two largest bondholders and the Town agreed to the appointment of a receiver to solve the problem. Enter Fairfield and Woods’ long-time client, Sterling Consulting Corporation, a business consulting firm and receiver with a thirty-year reputation for creative solutions to thorny business problems. Acting as receiver, Sterling procured low-interest federal loans to form a successor entity to the Water Enterprise, recapitalized the operations of the Water Enterprise through the use of a judicial sale, paid off the bonds, and put the successor to the Water Enterprise on a payment plan it could afford. Sterling’s creative thinking took what had been an impasse between a municipality and its bondholders and turned it into a success for both, thereby demonstrating the efficacy of a state-court receiver to resolve the financial issues of a quasi-municipality.