BRADENTON, Fla. — A Birmingham, Ala., agency has closed on $64 million in bank loans that were privately placed due to concern that the recent bankruptcy of Jefferson County would make it difficult to seek financing in the bond market.
Jefferson County’s seat is Birmingham, where city officials are using bank loans to build a new ballpark for the minor league Birmingham Barons, a Double-A affiliate of the Chicago White Sox.
Birmingham was in the midst of attempting to finalize the ballpark financing when Jefferson County filed the largest-ever municipal bankruptcy on Nov. 9, according to city finance director Tom Barnett.
“It’s a very high-profile project, and we didn’t want to take the risk that something could happen with Jefferson County that would cause our [financing] not to go forward,” he said
He added that underwriters and banks were consulted before final terms of the loans were negotiated.
“You never know until you test the market, and we just didn’t want to take a risk that there would be a problem,” Barnett said. “We just planned around that with the bank financing.”
For more than two decades, the Barons have played in Hoover, about 10 miles south of Birmingham.
The new ballpark is being built by the city as part of a long-planned economic development project, and to lure the Barons back to Birmingham where the team played before moving to Hoover.
The 30-year bank loans for the ballpark closed Dec. 15 with a true-interest cost of 3.09%, Barnett said.
Some $60 million was placed with the Spanish bank BBVA Compass, and another $4 million was placed with the Atlanta-based minority-owned Citizens Trust Bank, which has a branch in Birmingham.
The loans were negotiated through the Public Athletic Cultural and Entertainment Board, an agency created by the Birmingham City Council several months ago. The ballpark is expected to open in time for the Barons’ 2013 season.
Barnett said he does not anticipate any long-term adverse impact as a result of the county’s Chapter 9 filing.
City officials are currently considering whether to propose a $75 million general obligation bond referendum early next year.
Birmingham has about $250 million of GO bonds outstanding, according to Barnett.
The city has a dedicated ad-valorem tax that secures its GOs, which are rated in the double-A category by all three major rating agencies.
Alabama allows cities and counties to sell bonds and warrants as two kinds of long-term financing vehicles. State law requires that voters approve all bond issues. Voter approval is not required to sell warrants.
Jefferson County has $4.23 billion of outstanding warrants that have been affected by its bankruptcy.
Alabama law allows cities and counties to file for Chapter 9 to adjust debts if they have funding or refunding bonds outstanding.
Creditors have argued that Jefferson County does not qualify to file for bankruptcy because it does not have bonds outstanding, only warrants.
Judge Thomas Bennett, who is overseeing the case, has indicated that he may ask the Alabama Supreme Court to rule on whether warrants are the equivalent of bonds under state law for the purpose of filing for Chapter 9.