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December 2, 2009
Nets arena gambles on subordinated tranche
Project Finance
Goldman Sachs and Barclays Capital have split the proposed bond financing for the Nets basketball arena into senior and subordinated tranches, in a bid to win an investment grade rating for some of the bonds and sell them before a 31 December tax-exempt treatment deadline. The debt will break down into a $500 million senior tranche due 2047, to be serviced by payments-in-lieu-of-taxes (PILOTs) and a $146 million holding company tranche.
This subordinated tranche, which is taxable, does not cross-default with the senior bonds, is described as "equity-like", and is likely to be sold to one of the project company's sponsors. The split into senior and subordinated tranches is indicative of the struggle that the developer of the project, Forest City Ratner, has faced in gaining an investment grade rating on the debt. The subordinated tranche has not been rated, and while the agencies have not produced a consolidated rating for...
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Posted by lumi at December 2, 2009 7:02 AM