CHICAGO — The Illinois Sports Facilities Authority has launched a search for underwriters to help refund or restructure its debt.
The agency is seeking to ease the risk that Chicago city coffers will be tapped to make up for potential shortfalls in hotel tax revenues pledged to repayment of $400 million of Soldier Field revenue bonds issued in 2001.
Proposals from underwriters seeking to participate in possible ISFA deals are due by June 24. The deadline is the same for law firms interested in working with the ISFA in the role of bond or underwriters counsel.
The authority owns and operates U.S. Cellular Field, home of Major League Baseball's White Sox. The agency also served as issuer for revenue bonds sold in 2001 to finance renovations to the Chicago Park District-owned Soldier Field, home to the National Football League's Chicago Bears.
The agency outlines 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 documents read. "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."
The ISFA intends to announce the underwriting pool by Aug. 1. The agency earlier this year picked Acacia Financial Group, Public Finance Advisory LLC, and A.C. Advisory Inc. as advisors.
"Since securing a financial advisory team in March, we have been working closely with the team to examine potential refunding and restructuring opportunities. We have now moved to the next step" in issuing the RFPs "in order to get a full team in place to evaluate potential cost savings on ISFA bonds," said ISFA executive director Kelly Kraft.
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 to cover debt service.
Hotel tax revenues have since improved, generating sufficient revenues since then. However, with debt service steadily increasing annually, the authority is 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.
Negative arbitrage had complicated the potential economical savings of a traditional refunding suggested in the past based on the statutory boundaries on the Soldier Field debt and its backloaded structure, market participants said.
The agency is exploring a traditional refunding for savings and a restructuring that involves an extension of the bonds' final maturity. Several hurdles would exist in that scenario. State legislative approval would be needed. The authority is also limited to the total overall size of its issuance and the parking district and Bears' current lease expiration date are tied to the bonds' maturity.
The RFP seeks input from bankers on a refunding/restructuring with no statutory changes and a possible five, 10, or 15-year extension of the final maturity.
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 needed to cover debt service and then reimburses itself with funds from the agency's 2% tax on hotels in Chicago. 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 shortfall in hotel revenues. The backloaded and steep debt-service repayment schedule was driven by the need to accommodate repayment of the White Sox bonds, which were retired in 2010. Debt service of $28 million in 2013 rises to $88.5 million in 2032.