Volusia County, Florida, issued three series of bonds to finance the acquisition and renovation of a senior-living facility. After the onset of the COVID-19 pandemic, the facility did not generate enough revenue to make the agreed-upon regular payments to bondholders. The facility was sold for a loss. The district court determined that the proceeds of the sale must be distributed to first-tier bondholders before second-tier bondholders and to second-tier bondholders before third-tier bondholders.
On appeal, a third-tier bondholder argued that the district court should have distributed the sale proceeds to all bondholders on a pro rata basis.
The Court of Appeals affirmed, holding that the district court properly interpreted the governing agreements by giving first-tier bondholders priority over second-tier bondholders and second-tier bondholders priority over third-tier bondholders.