CHICAGO - The Illinois Sports Facilities Authority has selected Barclays and Goldman Sachs as bookrunning senior managers on a refunding deal it hopes to sell in June.
The authority owns and operates U.S. Cellular Field, home of Major League Baseball's Chicago White Sox.
It also served as issuer for $400 million of revenue bonds in 2001 to finance renovations to the Chicago Park District-owned Soldier Field, home to the National Football League's Chicago Bears.
The authority has long looked at a refunding of its Soldier Field bonds as a means to blunt the risk that it would have to tap city of Chicago coffers to cover debt service in years when pledged hotel revenues fall short.
"We have seen dramatic improvements in the market to make a refunding attractive for the authority to capture savings," said ISFA executive director Kelly Kraft. "We are examining opportunities to achieve savings on each series of our bonds. The refunding would be for straight savings."
The authority's debt is governed by its state statutes so any move to push out final maturities or increase debt size would require legislative authorization.
ISFA had a total principal amount of approximately $442 million outstanding from its 2001, 2003, and 2008 series of bonds, according to a July 2012 report. The last of the debt matures in 2032 and annual debt service on the bonds ramps up dramatically from $32 million in fiscal 2013 to $88.5 million in fiscal 2032.
The authority, working with the city, used a backloaded debt-service repayment schedule on the Solider Field bonds to accommodate the repayment schedule of the White Sox stadium bonds, which were retired in 2010.
In addition to the selection of Barclays and Goldman as joint book runners, the authority board recently named BMO Capital Markets, Cabrera Capital Markets LLC, and Lebenthal & Co. LLC as co-senior managers. Blaylock Beal Van LLC, Mischler Financial Group Inc., and RBC Capital Markets round out the syndicate as co-managers.
The authority previously selected Acacia Financial Group and A.C. Advisory Inc. as its financial advisors.
Quarles & Brady LLP and Pugh Jones & Johnson PC are bond counsel. Underwriters counsel is Burke Burns & Pinelli Ltd. and Neal & Leroy LLC.
The authority last June launched the search for bankers and bond counsel after selecting advisors.
The agency outlined its needs in the RFP.
"The 2% hotel tax is the authority's principal source of revenue and a narrowly-based source that can be volatile, particularly in an economic downturn," the document said. "Due to this volatility, the authority faces several challenges in the upcoming years. To effectively manage these challenges, the authority seeks significant debt service savings through the refunding and restructuring of some or all of its outstanding debt."
A gap in hotel tax collections and debt service forced the agency in 2011 for the first time since the Soldier Field issue to tap the city's backstop, which comes from a pledge of income taxes. The agency needed about $185,000.
Hotel tax revenues have since improved, generating sufficient revenues since then. They generated a record amount for the city last year and are tracking well into the authority's fiscal year that ends June 30.
However, with debt service steadily increasing annually, the authority has been under pressure to find a long-term solution.
Members of the agency's board are appointed by Illinois Gov. Pat Quinn and Chicago Mayor Rahm Emanuel.
Loop Capital Markets LLC Chief Executive Officer Jim Reynolds, an Emanuel appointee, heads up the authority's finance committee.
Negative arbitrage had long complicated the potential for economic savings from a traditional refunding.
The state's pledge to annually appropriate a portion of its 5% statewide hotel tax along with $10 million in state and city subsidies secures the Soldier Field bonds. Illinois advances the authority the funds for debt service then reimburses itself with revenue from the agency's hotel tax.
The city provides an annual $5 million subsidy from its share of income taxes. The income tax serves as an additional backstop to make up any gap in hotel revenues.