CHICAGO— The Regional Convention and Sports Complex Authority, Mo. will take competitive bids Tuesday on a refunding of bonds issued for the St. Louis Rams’ Edward Jones Dome.
The authority will current refund St. Louis County’s $32 million of remaining debt and Missouri’s $70 million. The city’s share was previously refunded. Columbia Capital Management LLC is advising both the county and state on the transactions which will be bid separately in two transactions on Tuesday. Gilmore & Bell PC is bond counsel.
The sale comes as the managers of the stadium earlier this month officially notified the Rams that they would not follow an arbitration panel’s ruling and finance $700 million in upgrades as required under terms of the lease which expires in 2025, opening the door for the team to move.
Rising interest rates in recent months have chipped away at some of the savings associated with the refunding, but they still remain significant. The state expects to capture about $8 million in net present value savings. “The saving will go to the state’s general fund,” said Stacy Neal, director of accounting in the state’s office of administration.
The county anticipates at least 10% in present value savings and although rates have risen over the last two months, Columbia Capital advisor Jeff White noted that the hike has been less pronounced on the short end of the curve and the bonds go out only to 2021.
The RCSCA issued $256 million of 30-year appropriation backed bonds under a complex agreement between the city, county, state, commission and team in 1991 to finance the stadium and an expansion of the adjacent A.J. Cervantes Convention Center.
The final maturity date is in 2021 while the Rams’ lease expires in 2025. The state, St. Louis, and St. Louis County together pay $20 million annually to cover debt service and $4 million for maintenance. The city and county tap hotel and motel taxes to cover their share.
Ahead of the sale, all three rating agencies affirmed the rating on the state backed bonds. Fitch Ratings assigns an AA, Moody’s Investors Service assigns a Aa2, and Standard & Poor’s assigns a AA-plus. The state’s general obligation bonds carry triple-A from all three.
“The Aa2 rating is two notches off the state’s general obligation bond rating of Aaa, reflecting the need for annual legislative appropriation of the financing agreement payments and the relatively less-essential nature of the stadium project,” Moody’s said of the rating.
Moody’s underscored that nearly 17% of Missouri’s net tax-supported debt carries an appropriation pledge which provides strong incentive for the state to meet its commitment in order to maintain access to the capital markets.
The county only sought a Standard & Poor’s rating on its share of the refunding. Analysts assigned a AA-plus rating to the bonds secured by a county rental payment subject to annual appropriation. The rating agency also affirmed the AA-plus assigned to other authority debt supported by county rental payments and the county’s AAA rating.
An independent arbitration panel earlier this year sided with the Rams in finding that the St. Louis Convention and Visitors Commission must make $700 million of stadium improvements to meet a lease requirement that keeps the stadium on par with the top 25% of professional football stadiums by 2015. Without the improvements, the team can cancel its lease or shift to annual renewal after the 2014 season.
The CVC formally informed the team it would not make the improvements earlier this month. The team’s fate remains unclear as some have talked about building a new stadium. Local press reports have quoted Gov. Jay Nixon as saying the ball is in the team’s court. The authority contracts with the CVC to operate the stadium and it leases the stadium to the team.
The offering statement notes the potential loss of the team could add to the appropriation risks. Neal downplayed that risk, saying the state is unlikely to jeopardize its top rating over the bonds. The dome also hosts other college basketball and football sporting events and concerts and provides additional room for conventions. “The stadium would continue to be valuable,” she said. The stadium opened in 1995, the year the Rams relocated from Los Angeles.
Standard & Poor’s echoed that position: “We believe that the county will continue to have an incentive to appropriate its annual payments under the financing agreement regardless of whether or not the Rams are in St. Louis.”
The authority earlier this year approved a resolution hiring Goldman Sachs to advise it on stadium issues. That contract came under scrutiny when questions were raised over language that appeared designed to preserve the firm’s ability to work in the role of broker-dealer on a potential stadium bond sale. Regulatory rules bar firms from serving as both an underwriter and financial adviser. The status of the contract is unclear as the offering statement makes no mention of the authority working with an advisor.