Decisions expected this week on Yum! Center bond rating - WDRB 41 Louisville News

Decisions expected this week on Yum! Center bond rating

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LOUISVILLE, Ky. (WDRB) – The Louisville Arena Authority expects to know as early as Wednesday how Wall Street analysts view the plan to refinance the KFC Yum! Center’s debt.

The decisions by Moody’s Investors Service and Standard & Poor’s will affect the ultimate cost of the effort to salvage the arena’s finances, which have pushed the public project in downtown Louisville toward insolvency.

Arena officials say getting an “investment-grade” rating on reissued bonds of up to $450 million could yield savings of tens of millions of dollars in the decades to come.

“We would pay so much less interest over the course of the bonds,” Scott C. Cox, the arena authority chairman, said in an interview after Monday’s arena board meeting. He said those savings “could be $50-$60 million – maybe up to $100 million.”

The two rating agencies recently met with arena representatives, with Moody’s spending time discussing the status of the University of Louisville men’s basketball program, Cox told the arena board. U of L is the Yum! Center’s main tenant, playing about 20 home games each year.

Moody’s raised the prospect of the NCAA’s harshest sanction -- the “death penalty” -- in an October research note, warning that U of L could face the loss of games for an unknown period of time. The basketball program is snared in a federal bribery investigation while already on NCAA probation.

But Cox said he was optimistic after recent discussions with Moody’s representatives.

“I think we were able to persuade them that any sort of worst-case scenario was so unlikely,” he said.

William Summers V, the arena authority’s vice chairman, added: “It is unlikely, but at the end of the day this community is still going to be a basketball community.”

The arena board has sought to refund the existing bonds that paid for the construction of the KFC Yum! Center, replacing them with new bonds and more affordable annual payments on the debt. Without the refinancing, arena officials have said they may be unable to make those payments by 2020.

Documents previously filed with the state show that the arena authority expects bond proceeds of $387.5 million, although it can issue up to $450 million; with principal and interest, the arena board would owe $819.2 million over 28 years.

Preliminary estimates suggest the arena authority actually will pay more -- $29.3 million, on average – through 2045, compared with the current annual obligations of $25.8 million. But the amount owed over the next decade would be lower – as much as $10 million less in some years.

The arena authority already has received the local and state legislative approvals it needs, and on Monday the board authorized issuing the new bonds. It did so after meeting in an executive session Monday morning that was closed to the public and two reporters in attendance.

Before the closed session, the authority did not cite the specific part of Kentucky law that allows for the private meetings. In an email Monday afternoon, a board attorney told WDRB News that it had closed the meeting under a provision for meetings that “federal or state law specifically require to be conducted in privacy.”

John Egan, an attorney with arena authority general counsel Frost Brown Todd, wrote that attorneys provided board members with legal advice on a draft “preliminary offering statement” to be posted online this week.

Arena attorneys, he wrote, view federal securities law as preventing the board from making public disclosures about the statement until it is made available to the public.

Related Stories:

Yum! Center bond plan gets final state approval

Latest U of L turmoil muddles KFC Yum! Center debt plan

Despite refinancing, Louisville Arena Authority to make higher annual KFC Yum! Center debt payments

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

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