Moody’s Drops Mets Ballpark Debt to Junk

Moody’s Investors Service yesterday downgraded to junk status bonds sold to finance the New York Mets Major League Baseball stadium, citing the diminished credit quality of a surety provider as one of the reasons.

The downgrade to Ba1 with a stable outlook from Baa3 affects $694.8 million of bonds sold by the New York City Industrial Development Agency on behalf of Queens Ballpark Company LLC.

Ambac Assurance Corp. is surety provider for the debt service reserve fund on $547 million of Series 2006 PILOT bonds only. Moody’s rates Ambac Caa2, with a developing outlook.

The downgrade affects the bonds' underlying rating. The Series 2009 PILOT bonds continue to carry an insured rating of Aa3.

“The very low credit quality of the surety provider renders the protection typically offered by a debt-service reserve much less effective than contemplated at the time of the 2006 bond issuance,” Moody’s said in ratings report. “Having the Ambac DSRF surety rather than a cash-funded DSRF liquidity reserve sufficient to address operating and strike risks is a credit weakness.”

The IDA sold the bonds in 2006 and 2009 to finance construction of Citi Field in Queens. Most of the bonds are secured by payments in lieu of taxes. Although $147.8 million of the bonds do not have an Ambac surety, they were also downgraded because they are either subordinate to those bonds or a default of the 2006 PILOT bonds would constitute an event of default on those bonds under their indentures, Moody’s said in the report.

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