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December 2, 2009
Atlantic Yards report: Arena financing doesn't all add up
The slippery, risky Atlantic Yards bond deal
Did you notice that the Atlantic Yards financing deal keeps changing and has some very unclear numbers?
No infrastructure bonds
In September, the Brooklyn Arena Local Development Corporation (BALDC) agreed that it was willing to authorize up to $400 million in tax-exempt bonds for Atlantic Yards infrastructure. Now that plan is off the table.
PILOT bonds lowered in a week
Last week, the BALDC contemplated issuing up to $825 million in tax-exempt and taxable bonds for the arena. Yesterday, the amount of tax-exempt bonds had declined from $600-$650 million to just $500 million, in order to reassure investors.
Risky tactics denied but not ruled out
Officials of the BALDC say they won't do the following things, but won't definitively rule them out:
- issue additional bonds
- bail out investors who lose on arena bonds
- issue tax-exempt bonds for infrastructure
And that ain't all of it.
An updated article in the Bond Buyer, headlined Atlantic Yards Debt Gets Rated, quotes a ratings agency analyst explaining why the PILOT bonds for the planned Barclays Center got an investment grade.
But the number of arena events is inflated:
Out of the 225 days a year the arena is expected to hold events, only 40 to 45 of those will be Nets games, [Moody’s analyst Richard Donner] said.
“While the Nets are important as an anchor tenant, the arena is reliant upon other revenues,” Donner said. “We view that as a positive.”
However, a 9/16/09 Barclays Center press release stated, "Overall, the arena will host over 200 events annually."
And, as we've known for years, the original projection of 225 events a year depended on the closing of the Meadowlands Arena (now the Izod Center) and no construction of an arena in Newark.
But there's an arena in Newark.
So, does Moody's know what it's doing?
Funny, but Moody's won't say...
Ratings agency Moody's, asked why it assumes 225 events a year at the AY arena, won't discuss it
Given that a Moody's analyst told the Bond Buyer that its just-above-junk rating for $500 million in Barclays Center PILOT bonds depended in part on 225 events a year, I thought it was worth following up.
Noting that the arena sponsors most recently predicted 200 events a year (an 11% difference), I asked if Moody's was confident of the stated total of 225 events and, if there were 200 events, how might that change the rating.
Moody's spokesman John Cline responded, "I'm going to have to direct you back to the release. That is our comment."
The ratings agency release said nothing about the number of events; that was elicited in an interview.
My take: Moody's made a mistake.
NoLandGrab: Did these guys learn anything from events last year that damned near brought down the world's economy? Apparently not.
Posted by eric at December 2, 2009 10:22 AM