Two bond deals totalling roughly half a billion dollars for additional financing for Major League Baseball stadiums in New York City got the green light Friday and are expected to come to market by the end the of the month.
The New York City Industrial Development Agency approved the issuance of $431 million of bonds on behalf of the New York Yankees over the objections of city Comptroller William Thompson Jr., whose representative voted against the deal. The deal has stirred controversy but was easily approved with 11 votes in favor, one against, and one abstention. The IDA board then approved $82.3 million of stadium bonds on behalf of the New York Mets will little fanfare. Preliminary official statements on both deals are expected to be released today.
The Yankee Stadium bond approval comprises $259 million of tax-exempt bonds backed by payments in lieu of taxes, $111.9 million of taxable bonds, and $60 million of refunding.
Goldman, Sachs & Co. will lead manage the sale of the Yankee Stadium bonds with maturities out to 40 years. The sale is expected to begin on Jan. 28. Nixon Peabody LLP is bond counsel.
The offering could be insured if that is cost effective, said Greg Carey, managing director at Goldman Sachs. The refunding is uncertain at this point but would be done to even out PILOT payments, he said. The additional bond proceeds would finance additions to the project.
Property tax for the completed stadium is expected to be $80 million, which would cover the $76.4 million maximum annual debt service on PILOTs.
Moody's Investors Service on Friday rated the new issuance Baa3 with stable outlook, citing a 4.2 times maximum annual debt service coverage. Moody's also cited as positive the fact that the stadium is nearly complete, greatly reducing construction risk and a non-relocation agreement between the city and the Yankees.
Standard & Poor's rates the bonds BBB-minus with a stable outlook.
In 2006, the IDA sold $942.6 million of tax-exempt PILOT bonds and $25 million of taxable bonds to finance the new Yankee Stadium.
The obligor, Yankee Stadium LLC entered into swaps on the 2006 bonds with various counterparties, including Goldman Sachs Bank USA. The swaps have a notional amount of approximately $1 billion and currently a mark-to-market value that is negative $77 million for the Yankees.
According to Moody's, the Yankees aren't planning to sell the taxable bonds at this time but will instead use bank loans for that portion of the financing.
State Assemblyman Richard Brodsky, D-Westchester, who has been a vocal opponent of the deal, issued a statement following the vote that he would continue to investigate it. IDA officials have said that they have gone above and beyond what was legally required in putting the deal together.
The Mets plan to use the proceeds of their $82.28 million of PILOT bonds to complete their new Citi Field statdium.
Citi will lead manage the sale which is expected to begin the same week as the Yankees deal. Nixon Peabody is bond counsel.
The deal is likely to be insured by Assured Guaranty Corp., according to a Moody's press release. Moody's rates the bonds Baa3. Standard & Poor's on Friday upgraded the Mets' outstanding $547.6 million of PILOTs that were issued in 2006 to BBB from BBB-minus and rates the new issue BBB.
The credit crunch and uncertain future of the bond insurance model could make the deals a tough sell, according to Fred Yosca, head of trading at BNY Mellon.
"Okay it's the Yankees, Mets, and it's the city, but Baa3 isn't an easy sell these days and they've already been to the well once each of them," Yosca said. "They've been in the market and they don't trade particularly well these days. It's going to take a lot of yield to get these done."