DALLAS — Facing 22 more years of debt service on its Jobing.com Arena, Glendale, Ariz., is seeking a new strategy to keep the Phoenix Coyotes playing in the $180 million venue after a deal to sell the hockey team fell through.
Proposed buyer Matthew Hulsizer withdrew his bid for the team after prolonged negotiations and a failed attempt to finance the sale with $100 million of city-issued certificates of participation. The COP deal was thwarted, in part, by a threatened lawsuit by the Arizona-based Goldwater Institute, which claimed the deal violated the state constitution.
The city has not identified any other potential buyers for the team.
The original plan was for the city to pay Hulsizer $197 million, including proceeds from the COPs, to allow him to buy the team from the National Hockey League for $170 million. The city based the payment on Hulsizer selling the parking rights to the city and managing the arena.
The Coyotes, purchased by the NHL after a bankruptcy filing by the previous owners in 2009, will remain in Glendale for at least another year because the city agreed to a $25 million subsidy to cover losses. It will be the second year the city pays the league $25 million to cover the team’s losses.
Without the subsidy’s renewal, the team was poised for a sale to interests in Winnipeg, Canada, who subsequently purchased and moved the troubled Atlanta Thrashers franchise.
Neither city officials nor the NHL have said how many years they would continue to operate in Glendale with the city covering the losses. However, the NHL has indicated that it does not plan to be a long-term owner of the team.
The city issued $50 million of tax-exempt Series A and $105 million of taxable Series B revenue bonds through the Glendale Municipal Property Corp. on May 16, 2003 to finance the arena. The bonds were insured by Ambac Assurance Co. for triple-A ratings before bond insurers’ ratings began to collapse.
Series A tax-exempts maturing in 2033 with coupons of 5% and ratings of Aa3 from Moody’s Investors Service and AA-plus from Standard & Poor’s have recently yielded 4.51% or 51 basis points above the Municipal Market Data yield curve. Taxable Series B bonds maturing in 2033 with a coupon of 5.58% were recently yielding 6.73% or 244.7 basis points over the MMD curve.
Even if the Coyotes move away, bondholders would be affected only indirectly since the debt is backed by city sales tax rather than arena revenues.
However, Glendale is likely to see sales tax revenues from a related development known as Westgate City Center decline due to vacancies in the retailing hub and a planned foreclosure sale of Westgate in September.
Former Coyotes owner Steve Ellman agreed to build Westgate as part of the original arena plan with the city.