We Get Interesting Comments About The Arena

Of course we get interesting comments about the arena:

J. Bruce Miller // May 14, 2013 at 10:15 pm

I read where the Arena Authority is considering the possibility of refinancing the bonds. Their present interest rate averages a little above 6%. Can you imagine what the interest rate would be when the bond rating agencies note that the major (and only) tenant is a 501(c)(3) charity, which takes 88% of the suite revenue stream by virtue of a lease that was negotiated with the 501(c)(3) charity by many of its largest benefactors and members of the charity’s various boards — which results in the building making a couple hundred thousand dollars a month in what it calls ‘operating income’ but DOESN’T INCLUDE its principal and interest payments. When you include them the INTEREST PAYMENTS, ALONE, ARE APPROXIMATELY $1.6M A MONTH — so the ‘thing’ is losing about $1.2-1.5 million a month! Sorry, but ‘that dog doesn’t hunt’ in New York City — even though the cool-aid tastes good around here.

Possibility City!

4 thoughts on “We Get Interesting Comments About The Arena

  1. As crazy as it sounds they can possibly get lower rates. nearly junk rated municipal bonds in Illinois still yield under 5%, while Kentucky bonds are under 4%. Near 0 rates create strange situations. Compared to what is going on in Frankfort with retirement and even MSD, I think the stadium is small change.

  2. Mr. Tobe: I agree with your conclusion that a $3-400mm debacle is small change when compared with the state’s retirement and MSD’s predicaments. However, there will be no refinancing of the arena bonds UNLESS some entity — either the city or state or the sole tenant (UofL) guarantees the P&I payments going forward OR the entire UofL lease is re-writted. When you examine the entire transaction you find there are unexplanable guarantees within the Prospectus for up to $2mm for Papa John’s stadium shortfalls on its bonds and so many limits on the usage of the arena imposed by the lease that the sale of a refinanced bond at a lower rate will be virtually impossible. Further complicating a refinancing is the fact that the Arena Authority has borrowed $7mm from Centerplate (which is its concessionaire under an 18 year contract) and used those monies to make interest payments — thus guaranteeing the 18 year contract and preventing its renegotiation. Furthermore, you’ll find that while the Arena Authority has paid its $1.5m to the Fair Board for dislodging it from its operational contract, it still owes the Fair Board nearly $5mm for its previous commitments to supplement the Board for the loss of UofL Freedom Hall income. It’s a nightmare that will require a ‘dream’ to refinance.

  3. My guess is someone will step up and guarantee the payments – city, state or UL. If UL does they will negotiate even tougher terms and guarantee we never get a NBA team.

  4. I’m not sure that the university has the authority to do such a thing without the approval of the state legislature. That being the case, I doubt very seriously that they will get such authority. As a matter of fact, they never were able to get the legislature’s authority to issue the bonds to build an arena on the campus — which is why they globbed upon the downtown facility.

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