DALLAS – Amid prolonged uncertainty and threats of a lawsuit, Glendale, Ariz., has called off plans to issue $100 million of certificates of participation to finance the sale of the Phoenix Coyotes National Hockey League team to private investor Matthew Hulsizer.
The city assured Standard & Poor’s that it had no plans to issue debt on parity with its outstanding COPs, which allowed the ratings agency to take the city’s AA-plus general obligation bond rating off negative credit watch. The city’s AA-rated COPs issued under the name Western Loop 101 Public Facilities Corp. were also removed from the watch list.
Analysts returned the city’s outlook to stable.
"The stable outlook reflects our expectation that good bond covenants, no plans for significant additional debt, and the city's diverse sales tax base will continue to contribute to strong MADS (maximum annual debt service) coverage, despite recent declines in pledged revenue," said Standard & Poor's credit analyst Sussan Corson. "Should debt issuance or declining trends in pledged revenue materially weaken currently strong MADS coverage, we could lower the ratings."
While the ratings action was positive news, Glendale still needs to find a buyer who is willing to keep the Coyotes playing in the city-owned Jobing.com Arena. The arena was financed with $180 million of revenue bonds in 2003 and brought with it private investment in the related Westgate City Center retail and entertainment development.
The NHL bought the Coyotes out of bankruptcy court to prevent the team from moving back to Winnipeg, Canada. After prolonged negotiations with the city and the NHL, Hulsizer last year agreed to buy the team and keep it in Glendale under a long-term contract in exchange for $100 million from the city’s proposed issue of COPs. The city agreed to pay Hulsizer another $92 million for managing the arena.
The debt sale was halted, however, when the Arizona-based Goldwater Institute threatened to file suit, claiming the use of public funds for private purposes violated the state constitution. Efforts to privately place the COPs were unsuccessful.
While the financing plan is not available, Hulsizer is still a potential buyer. Glendale’s city council is expected to meet with the investor in private Tuesday. No other potential buyers have surfaced, so far.
With the collapse of the original Hulsizer deal, the city has agreed to pay the NHL another $25 million to keep the team in Arizona for another season. So, far the city has agreed to cover up to $50 million in losses that the league is expected to incur from keeping the team in the arena.
Meanwhile, the relocation pressure was eased May 31, when the Atlanta Thrashers were sold to True North Sports and Entertainment with a planned move to Winnipeg. The NHL Board of Governors is expected to approve the sale Tuesday.
