Upgrade a boost ahead of Las Vegas convention deal
The Las Vegas Convention and Visitors Authority can tout a higher rating when it sells $500 million of revenue bonds next week.
Moody's Investors Service on Aug. 28 upgraded the authority's revenue bonds to Aa3 from A1 while assigning the Aa3 rating to the $500 million negotiated deal expected Sept. 13.
"The upgrade to Aa3 primarily reflects LVCVA's entrenched position as the nation's market leader for large-scale conventions and the area's substantial tourism amenities that include the renowned Las Vegas Strip," according to Moody's analyst Patrick Liberatore.
Moody's, separately, maintains its Aa1 rating on $801 million of the authority's double-barreled general obligation limited tax revenue bonds issued through Clark County, of which Las Vegas is the seat.
Bond proceeds from this month's deal will help fund the authority's $860 million Phase Two expansion project that will add 1.4 million square feet to Las Vegas Convention Center — the country's busiest. The expansion is slated for completion in time to welcome the Consumer Technology Association's annual CES show in 2021. A Phase Three is also planned.
RBC Capital Markets is lead manager. JNA Consulting Group, LLC and Montague DeRose are co-financial advisors. Stradling is bond counsel.
“Southern Nevada’s economy is driven by tourism and this expansion will propel our convention center forward to enable us to maintain our status as the number one trade show destination in North America," Rossi Ralenkotter, LVCVA chief executive officer, said in April when architectural drawings were released.
The Authority's revenue bonds are all secured by a first lien pledge of net revenues from hotel room taxes collected throughout Clark County as well as revenues from its convention facilities after the payment of operating expenses.
The new deal is also secured by the authority's expansion pledged revenues, an incremental hotel tax legally dedicated to expanding the Las Vegas Convention Center.
"Increasing hotel room rates are bolstering pledged tax receipts at a modest pace and to new all-time highs, and average daily hotel occupancy has been uncommonly strong at 89%," Liberatore said. "Sound maximum annual debt service coverage of 3.0 times fiscal 2017 pledged revenues provides headroom to endure economic volatility. Recent economic growth in the US and globally directly benefits the authority's revenues."
Visit volume declined modestly in 2017, but remained in the 42 million range, after reaching all-time highs for each of the past few years, according to Moody's.
Marketed by the authority, the convention center is a global travel destination for business and leisure. The authority is an independent governmental entity with its own governing board and administrative staff.
S&P Global Ratings affirmed its A-plus underlying rating on the authority's outstanding revenue bonds ahead of the new deal. Both rating agencies assign stable outlooks.
Proceeds of the 2018B bonds will be used to finance construction of the convention center project, fund capitalized interest through 2020, and pay the costs of issuance.
The convention center adjacent to the Las Vegas Strip encompasses approximately 3.2 million square feet with exhibit space of 2 million square feet and meeting space of nearly 250,000 square feet. "The facility is one of the busiest centers in the world - centrally located within three miles of over 100,000 guest rooms," according to its website.
The extremely large base of hotels and rooms has very high occupancy rates that generate most of the authority's gross pledged revenue, said S&P Global Ratings credit analyst Michael Parker.
S&P cited the authority’s strong pro forma maximum annual debt service coverage for the series 2018B bonds and the outstanding revenue debt, using estimated collections in fiscal 2018. S&P also highlighted the authority's participation in the stabilized Las Vegas-Clark County metropolitan statistical area and its leading position as a national and international destination for tourists, business travelers and special events.
Moody's stable outlook anticipates continued positive trends for pledged revenues, especially hotel taxes that are expected to grow modestly, which are supported by the Las Vegas area's resilient appeal as a global travel destination.