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We Get Interesting Comments About The Arena

May 15th, 2013 by jake · 4 Comments

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!

Tags: Arena · Hype · Possibility City

4 responses so far ↓

  • 1 Chris Tobe // May 16, 2013 at 7:22 am

    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 J. Bruce Miller // May 16, 2013 at 8:41 am

    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 Chris Tobe // May 16, 2013 at 4:01 pm

    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 J. Bruce Miller // May 16, 2013 at 4:14 pm

    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.