DALLAS — Standard & Poor’s has revised its outlook on the Harris County-Houston Sports Authority’s junk-rated junior-lien debt to stable from negative, citing the authority’s improving revenues and ability to pay debt service from other sources. The rating remains B.
“The revision is based on the authority’s continued ability to access available reserves from its additional required reserve through manageable draws to make accelerated payments on the series 2001C, 2001D and 2001E bonds,” said Standard & Poor’s analyst Russell Bryce.
Standard & Poor’s also affirmed its BBB rating and stable outlook on the authority’s senior-lien Series 1998A, 2001A, 2001G and 2001I bonds.
Moody’s Investors Service on Nov. 23 shifted its outlook to stable from negative on its Ba3 senior-lien, B2 junior-lien and B3 third-lien ratings.
In 2008, following the downgrade of bond insurer MBIA Insurance Corp., the 2001C, D and E junior-lien bonds were put to liquidity provider UBS Investment Bank.
During 2009, the liquidity facility expired. As a result, the authority is required to pay the balance of the bonds in 10 semiannual payments. The first six payments have been made through May.
In 2010, debt service on the bonds was originally scheduled to total $9.4 million. Under the accelerated payment schedule, the debt service due in fiscal 2010 totaled $27.4 million, an increase of about $18 million, and debt service due in fiscal 2011 totaled $28.4 million. Officials project accelerated payments will come to about $26.4 million in 2012, $24.8 million in 2013, and $11.8 million in 2014, according to Standard & Poor’s.
The authority has tapped reserve funds four times for a total of $6.8 million since November 2010. However, the amount of reserves used for the May payments has fallen to $335,000 this year from $670,000 in 2011.
As of this month, the reserves had a balance of about $27.7 million. National Football League supplemental revenues will continue to cover the additional costs associated with the accelerated payments due on the Series 2001E bonds, the authority said.
The authority issued bonds to build Minute Maid Park, home to Major League Baseball’s Houston Astros; Reliant Stadium, home to the NFL’s Houston Texans; and the Toyota Center, home to the National Basketball Association’s Houston Rockets.
The authority levies a 5% tax on gross rental receipts for vehicle rentals in Harris County. The authority also collects a 2% tax on hotel stays.
Pledged revenues from vehicle rentals and hotel occupancy tax collections fell 11.7% in 2009 and 1.1% in 2010. However, revenues improved 8.9% in 2011 to $42.2 million, driven by a 12.2% growth in hotel tax collections and 5.7% growth in vehicle rental collections.
In 2012, revenues have continued to rise through May, with vehicle rental revenues up 9.4% from a year earlier and hotel occupancy tax collections up 11.3%.
