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February 5, 2010

In a second effort to market taxable junk bonds for the arena, they have an interest rate--and smaller quantities are on the block

Atlantic Yards Report

Norman Oder has an update on the state of the Atlantic Yards arena bond financing:

So, the Atlantic Yards junk bonds were back on the market this week, and the Brooklyn Arena Holding Company (BAHC) may be selling them soon, near or at a hefty 11% interest rate.

First try

In December we learned that Standard & Poor's (S&P) rated the $146.8 million in taxable arena bonds as B, which is "very speculative." S&P assigned "a recovery rating of '6' to this debt, indicating our expectation of negligible (0%-10%) recovery in the event of a payment default."

Project Finance magazine suggested, apparently without foundation, was that the taxable bonds might be bought by Mikhail Prokhorov, slated to own 80% of the Nets and 45% of the arena company.

That's not how it worked out. Ten days later, on December 21, Standard & Poor's withdrew its preliminary ratings, stating, "The notes were not sold in December 2009. The issuer's [sic] intends to market them in the new year."

Back on the market, same risks

This week a smaller sum--$106 million in bonds--were for sale, according to a February 2 ratings report issued by S&P. It's a good time to market corporate bonds, according to the Wall Street Journal, before interest rates sky.

That said, the bonds still have a preliminary 'B' rating, and the recovery rating of '6', all of which means it's still a speculative investment.

Find out more on the possible timing of the sale, details from the ratings report (inluding the contention that construction has commenced), and speculation about Mikhail Prokhorov's investment, in the full article.

Posted by lumi at February 5, 2010 5:02 AM