Chicago suburb on CreditWatch over soccer stadium talks

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A Chicago suburb is in negotiations with Major League Soccer’s Chicago Fire to allow the team out of its lease at a publicly funded stadium that has dragged down the suburb's rating.

The impact on Bridgeview's ratings is not yet clear as it will depend on the settlement. S&P Global Ratings recently put the village’s junk rating of BB-minus on CreditWatch with developing implications.

"The CreditWatch placement reflects confirmation by village management of ongoing negotiations with the Chicago Fire soccer team to amend the existing agreement for use of the SeatGeek Stadium,” said analyst Blake Yocom. The stadium was previously known as Toyota Park under a prior naming rights deal.

The team is reportedly eyeing a move to the Chicago Park District-owned Soldier Field in downtown Chicago beginning in 2020. Soldier Field is best-known as home to the NFL's Chicago Bears.

The Fire moved to its 20,000-seat soccer-specific stadium in Bridgeview to escape from 61,000-seat Soldier Field, its original home venue, as part of what was then a trend for MLS teams to build their own smaller venues to get out of large, shared multi-purpose stadiums. Since then teams in Seattle at Atlanta have succeeded in filling larger central-city venues built for NFL football.

The current lease runs to 2036. First, the team would need to negotiate an amendment fee, or some other form of settlement with the village — likely a buyout of the remainder of a 30-year lease through 2036, S&P said.

“Should this scenario move forward, we will assess its effects on the village's creditworthiness and the overall settlement — specifically, the stadium and general fund operations and the village's debt and contingent liability profile," Yocom said. “We expect to resolve the CreditWatch as soon as we have received the necessary information and completed our analysis — typically within 90 days.”

Published reports on sports websites have suggested the buyout could cover a majority of the village’s stadium debt, which would ease budget and debt strains, but it could still leave the village with some related debt and the need to find a new tenant or other events such as concerts to fill what would otherwise become a white elephant.

The village has about $260 million in debt including its sales tax securitization issues. S&P does not rate the securitization bonds. S&P cut the village by four notches to junk in March 2017.

Fitch Ratings assigns a BB-minus issuer rating to the village and rated $47 million of securitization bonds that sold in December 2017 BBB-plus.

The village of 16,000 issued $135 million for the stadium in 2005, which has been followed by tax increases, asset sales, refinancings and restructurings.

The securitization bonds hold a first lien on the village’s state-collected portion of its home rule sales tax and local share of the statewide sales tax. Under the structure, the village sold all right, title and interest in the pledged revenues to the corporation and the state directs all pledged sales tax revenues to the trustee.

Fitch’s speculative grade issuer default rating reflects a “very high liability burden” that includes its bonded debt and pension liabilities that are at 61% of village personal income.

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