Strong ratings buoyed Worcester in ballpark bond sale
Worcester, Massachusetts, buoyed by strong ratings, sold its first installment of bonds to pay for the construction of a minor-league baseball park scheduled to open in 2021.
The Oct. 31 negotiated sale of roughly $31.4 million of Series 2018B general obligation taxable ballpark project bonds is part of a planned $100 million overall issuance to finance Polar Park, the expected home of the Worcester Red Sox.
The Pawtucket Red Sox, a Class Triple-A affiliate of the Boston Red Sox, announced their intended move to Worcester in August. The International League team will play two more seasons in Rhode Island.
UBS was lead manager for the sale, which occurred three days after the parent Red Sox won their ninth World Series championship. UniBank Fiscal Advisory Services Inc. was financial advisor and Locke Lord LL was bond counsel.
Moody's Investors Service rates the bonds Aa3. Fitch Ratings and S&P Global ratings rate them AA and AA-minus, respectively. All three assign stable outlooks.
The bonds priced to yield between 3.525% for a 2023 maturity and 4.786% for the 2048. Closing is scheduled Nov. 21.
"The city's strong financial profile reflects positive revenue growth prospects from an improving property tax base, manageable expenditure growth and a demonstrated ability to reduce expenditures during economic downturns," Fitch said. "The city has numerous projects in various stages of development outside of this stadium project that are adding to the revitalization of downtown and rehabilitation of existing properties."
Local beverage company Polar acquired the naming rights. Team officials expect to begin construction in July at the site of the abandoned Wyman-Gordon factory in Worcester's Canal District.
The City Council authorized $70 million in Series A GO bonds for the cost of the ballpark, land acquisition, culvert work, capitalized interest and borrowing costs.
UBS, which has a branch office in Worcester, marketed the bonds locally and Worcester's Chamber of Commerce promoted the sale to its members.
Under Gov. Charlie Baker, Massachusetts has sought to boost economic development in Worcester, 40 miles west of Boston and long accused of ineffectively marketing itself despite its plethora of institutions and cultural attractions that include Holy Cross University, Worcester Polytechnic Institute and the University of Massachusetts Medical Center.
Worcester is New England's second-most-populous city with more than 180,000 residents.
The project is a partnership among Worcester and its Redevelopment Authority; the ballclub; Madison Downtown Holdings; and the commonwealth.
“When you have a vision, and you have a sports venue and an entertainment draw to a local destination, then you can leverage the institutions that already in place," said Randy Gerardes, a senior analyst with Wells Fargo Securities.
Massachusetts has committed $35 million of infrastructure improvements and tax credits as part of a redevelopment of the immediate area. It will include new housing, a hotel, a parking garage and a fixup to blighted Kelley Square nearby, where traffic at a multi-pronged intersection is nightmarish.
"In some of the smaller cities, there’s an outsized impact as opposed to larger cities that have other entertainment opportunities," Gerardes said. "You see this a lot with minor-league baseball, franchises moving around within the same region.”
The team will pay the city annual rent in an amount equal to the debt service on the Series B Bonds for the corresponding year. The lease agreement includes a "no-relocation" covenant for the first 15 years, and a buy-out clause thereafter which includes responsibility for lease payments.
“Depending upon the structure of the deal, there are the certain kinds of risk to watch for, whether it’s driving up operating expenses or crowding out other liabilities such as pensions," Gerardes said. "Here, the minor-league team is sharing some of the risk and the city is backing it with its credit.”
In Rhode Island, Pawtucket's City Council has scheduled a Wednesday meeting over a plan to build on the abandoned Apex department store site that was proposed before the ballclub rejected it for Worcester's offer.
An amendment the city's redevelopment plan would enable it to declare the parcel blighted and then acquire it through a purchase of eminent domain.