DALLAS -- Tuesday’s $346 million negotiated refunding by the Louisiana Stadium & Exposition District is the final stage in the post-Katrina process to restore and ensure the financial viability of the Mercedes-Benz Superdome in New Orleans.

Restructuring the district’s debt is the culmination of an effort that has included renovations and repairs to the Superdome and elimination of annual retention payments to New Orleans’ professional sports teams, said Doug Thornton, senior vice president of SMG Services, which operates the Superdome and the New Orleans Arena for the state-created district.

“We believe we have a very bright future ahead of us,” Thornton said. “This debt restructuring is the final piece in the puzzle.”

The bonds are rated A by Fitch and A3 by Moody’s Investors Service.

Bank of America Merrill Lynch is senior book runner for the sale. Underwriters include Goldman, Sachs & Co., Morgan Stanley & Co. LLC, Raymond James | Morgan Keegan, and Dorsey and Co. Inc.

Foley & Judell LLP is bond counsel for the District. Public Financial Management Inc. is financial advisor.

The refunding will replace auction-rate debt issued by the District in 2006 with fixed-rate bonds, resolve all swap agreements associated with that earlier debt, and end litigation by the state and district against Bank of America Merrill Lynch, the lead underwriter on the 2006 issue.

The outstanding variable-rate bonds were issued in March 2006 to provide new money for repairs to the Superdome after hurricanes Katrina and Rita. Proceeds also were used for working capital and debt restructuring.

Louisiana purchased $233.1 million of the outstanding tax-exempt 2006 bonds in March 2008 when the auction-rate market collapsed, and has been holding the bonds since then at 1.25% interest.

The negotiated sale will include $297.1 million of tax-exempt revenue bonds and taxable series of $46.2 million. The state will also purchase $50 million of taxable subordinate debt in a separate transaction.

Total proceeds of $437.6 million include a premium of $24.8 million, prior funds totaling $12 million, the $50 million from the state’s purchase, and a $7.5 million settlement from Bank of America Merrill Lynch.

Proceeds will refund $279.3 million of the outstanding debt from 2006. The sale will provide $117 million for termination payments on several fixed-to-fixed and floating-to-fixed swaps and cover a $3.9 million settlement with the IRS for the District’s tax-exempt debt that has been held by the state since March 2008. Proceeds will also go to a $24.8 million debt reserve fund and a $10 million escrow fund. 

The debt is supported by a 4% hotel occupancy tax in Orleans and Jefferson parishes that is projected to provide coverage of at least 1.6 times the annual debt service of $24 million. Collections over the past 12 months totaled $37 million.

“We expect the coverage by the hotel tax revenue to be better than that because of the strong ratings and stable outlooks we received on this issue,” said Lisa Daniel of PFM.

“The refunding allows the District to lock in their debt service payments to a fixed cost expected to be less than $24.5 million annually and removes all interest rate volatility risk and swap counterparty risk currently associated with the existing debt,” she said.

New Orleans is back, Thornton said, in large part to the economic activity generated in the 53-acre district. The Superdome is home to the New Orleans Saints of the National Football League and the New Orleans Hornets of the National Basketball Association occupy the arena.

“The rebirth of the Superdome is one of the most compelling stories in American sports history,” Thornton said. “The Superdome has served as a national symbol of regional rebirth and recovery.”

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