BRADENTON, Fla. - Orlando hopes to finally move forward next week with the pricing of $330.6 million of fixed-rate debt - two bond sales that were delayed more than two months by volatility in the credit market and other factors.
Officials said the sale of $32.64 million of sales tax revenue bonds would take place Monday or Tuesday depending on market conditions and $298 million of tourist tax revenue bonds would be sold in three series on Wednesday.
Proceeds will provide a major chunk of funding for the construction of a $480 million, 750,000-square-foot multi-use events center in downtown Orlando that also will serve as the new home of the National Basketball Association's Orlando Magic and the Arena Football League's Orlando Predators.
The offerings were delayed in December for a number of reasons, according to Rebecca Sutton, Orlando's chief financial officer. In addition to the disruption in the market due to bond insurers' exposure to subprime mortgages and rating downgrades, it took longer than anticipated to obtain all the necessary approvals to bring the deals to market. The complex financing involves agreements with Orange County and the Magic, and numerous funding sources, including the sale of land.
"We do have agreements with various parties to get the financing in place as soon as possible," said the city's financial adviser, Tom Huestis, with Public Resources Advisory Group. "We're hoping the market cooperates."
Both sales "will be structured to attract both retail and institutional investors," Huestis said.
The $32.64 million of bonds, Series 2008, are secured by sales tax revenue rebated to the city by the state in a legislative program designed to help professional sports teams finance new venues.
The deal is expected to be structured with serial bonds through 2023 and term bonds in 2024 through 2027, 2032, and 2038.
Jackson SecuritiesLLC is the book-runner. Others in the syndicate are A.G Edwards and Sons Inc., Merrill Lynch & Co., and Rice Financial ProductsCo.
The city will determine at the time of pricing whether some or all of the bonds will be insured.
The sales tax bonds are rated AA-minus by Fitch Ratings, Aa3 by Moody's Investors Service, and A-plus by Standard & Poor's.
Wednesday's offering will be $181.76 million of senior tourist development tax revenue bonds, Series 2008A, $42.36 million of second lien subordinate tourist development tax revenue bonds, Series 2008B, and $73.87 million of third lien subordinate tourist development tax revenue bonds, Series 2008C.
Series A and B are expected to be serial bonds maturing in 2038 but there may be one or more term bonds. Series C is expected to be a term bond maturing in 2038.All series of the tourist development tax bonds are being insured by Assured Guaranty Corp.
The bonds are backed by interlocal revenues passed from Orange County to a trustee. The source of the revenues is the sixth cent of the tourist development tax, Sutton explained.
Citiis the book-runner for the Series 2008A bonds and co-senior manager for the 2008B and 2008C bonds. Goldman, Sachs& Co. is book-runner for the 2008B and 2008C bonds and co-senior manager for the 2008A bonds. Other firms in the syndicate are Banc of America Securities LLC, M.R. Beal& Co., Ramirez & Co., Raymond James & Associates, Siebert Brandford Shank & Co., and UBS SecuritiesLLC.
The 2008A bonds are rated A, A3, and A-plus by Fitch, Moody's and Standard & Poor's, respectively.
The 2008B bonds are rated BBB-plus, Baa1, and A, by Fitch, Moody's and Standard & Poor's, respectively.
Standard & Poor's rated the series C bonds BBB-plus. The other agencies were not asked to rate them.
Analysts said the ratings reflect the strong tourism and convention market in Orlando and Orange County, which are home to central Florida's mega-theme parks. Ratings on the subordinate bonds, particularly series C, generally reflect lower debt service coverage.
In addition to bonds secured by sales and tourist taxes, the city plans to fund the cost of the events center from the sale of the existing Orlando Magic arena, city funds and loans, interest earnings, and a $50 million contribution from the Magic. The team also has signed a non-relocation agreement with the city stating that it will play home games at the new arena for 25 years.
Unlike many arenas and stadiums built for a single purpose, Sutton pointed out that Orlando's new venue is called an events center "and it's going to provide a variety of entertainment opportunities."
Along with the new arena, the city is moving forward with concurrent plans to build a new, $425 million performing arts center and to spend $175 million renovating the existing Florida Citrus Bowl Stadium.
In December, the Orlando City Council approved the sale of $80 million of industrial development bonds secured by pledged contributions for design of the 400,000-square-foot performing arts center. The bonds, in a private placement, were sold to Bank of AmericaNA. Holland & KnightLLP was bond counsel.
Other financing sources are being used to do the initial renovation work for the Citrus Bowl.
For a portion of the construction financing, the city is planning on using approximately $150 million in tax increment bond financing for the arts center and Citrus Bowl. TIF financing, however, is uncertain due to several cases pending before the Florida Supreme Court.
"At the end of all the construction, we're going to have a really outstanding downtown activity center," Sutton said. "That's going to translate into economic opportunities for the city as well as improve the quality of life for the people who live there."
Orlando officials have worked on a new performing arts center for nearly 20 years and a new arena has been on the table for at least seven years.
Nabors, Giblin & Nickerson PA and Ruye HawkinsPA are co-bond counsel on both transactions next week.
Akerman Senterfitt & Edison PAis disclosure counsel on the sales tax bonds. On the tourist tax bond sale, GrayRobinson PA is disclosure counsel and Marchena and GrahamPA is underwriters' counsel.
