Arena board chair says getting coveted bond rating 'more difficu - WDRB 41 Louisville News

Arena board chair says getting coveted bond rating 'more difficult' amid U of L scandal

Posted: Updated:

FRANKFORT, Ky. (WDRB) -- The Louisville Arena Authority got final state approval on Thursday for its plan to reorganize the KFC Yum! Center's construction debt. 

But arena officials acknowledged the University of Louisville’s connection to a federal criminal probe into college basketball recruiting may complicate plans to refinance the bonds. The U of L basketball teams are the building’s main tenant.

Among the possible fallouts: The arena authority may not be able to secure a coveted “investment grade” rating on up to $450 million in new bonds set to be issued by the end of the year.

Without that rating from Wall Street analysts, annual debt payments would be “significantly more expensive” than currently envisioned, board chairman Scott C. Cox said.

Still, the arena authority believes that the “smart thing to do is to move forward at this time,” Cox told members of the Kentucky Economic Development Finance Authority.

Gov. Matt Bevin’s office also supports moving forward with the bond plan, said Scott Brinkman, the governor’s executive cabinet secretary. Kentucky’s governor and Louisville’s mayor appoint the nonprofit arena authority that oversees the Yum! Center’s finances.

Mayor Greg Fischer has “no significant concerns” about the deal advancing, spokesman Chris Poynter said.

Arena consultants said they are preparing new assumptions based on cases in which attendance falls or the program receives an NCAA "death penalty." In some instances, programs that have received such penalties have been forced to suspend whole seasons of play. 

Asked if he believed the bonds will get the investment rating, which arena officials say will make annual debt payments more affordable, Cox said: "It's going to be a close call -- and that's the truth. I would have told you that I was quite confident we would before this news out of the last couple of days."

He said one of the "worst-case scenarios" is U of L not playing in the Yum! Center for two years. Under revenue-sharing agreements, the university has provided more than $1.3 million annually in recent years.

In July, at the request of the arena authority, U of L agreed to pay the arena authority an additional $2.42 million per year. They’re responsible for paying that regardless of how this NCAA matter works out," Cox said.

Faced with increasing debt payments, the arena board intends to refund the arena’s bonds and replace them with new ones. In so doing, officials anticipate they will pay less over the next decade – in some cases, as much as $10 million less.

To retire the debt, the arena board would use a mix of revenues that includes money generated when U of L rents the arena for men’s basketball games.

"We do think the numbers still work, but it just makes it dramatically more difficult to get the credit rating that we'd like to have," Cox said. "It's remarkable what the actions of a small group of people can have on our city." 

Documents filed with the state show the arena authority expects bond proceeds of $387.5 million, although it could issue up to $450 million; with principal and interest, the total amount owed would be $819.2 million over 28 years.

Reach reporter Marcus Green at 502-585-0825, mgreen@wdrb.com, on Twitter or on Facebook. Copyright 2017 WDRB News. All rights reserved.

Powered by Frankly
All content © Copyright 2000 - 2017 WDRB. All Rights Reserved. For more information on this site, please read our Privacy Policy, and Terms of Service, and Ad Choices.