LOUISVILLE, Ky. (WDRB) – A second Wall Street firm gave the Louisville Arena Authority’s new debt plan a low risk of default, accomplishing a goal KFC Yum! Center leaders believe will lead to big savings.
Standard & Poor’s joined Moody’s Investors Service in rating the arena board’s proposed bond issue as “investment” grade on November 17. That is a step above the “junk” status of the current arena bonds, which would be refunded and replaced by the end of the year.
The Standard & Poor’s rating of “A-“ is four levels above the company’s lowest investment-worthy rating, said Scott C. Cox, the arena authority’s chairman.
“We think that rating accurately reflects the improved financial outlook for the KFC Yum! Center,” Cox said.
The ratings cap a year of changes to arena contracts and agreements, including a pledge by the University of Louisville’s athletic association to pay an additional $2.42 million each year to the arena authority. U of L’s basketball teams are the main tenants of the arena.
The arena authority – a nonprofit corporation appointed by Kentucky’s governor and Louisville’s mayor – uses a patchwork of funds, including revenues from events at the Yum! Center, to pay off debt.
It still will rely on a portion of sales and property tax revenues near the Yum! Center. While volatile and subject to fluctuation, the tax increment financing district is projected to be the largest source of funds for the bond payments.
“Over the term of the debt, we estimate that 77% of revenues will come from sources that are either fixed or contractual,” S&P analysts wrote. “This gives the arena some cushion if the local economy sours.”
S&P anticipates the deal structured by the arena authority’s financial advisers will provide more revenues for covering debt costs. Without refinancing, there would barely be enough money to make bond payments in 2020.
Cox said he and other arena officials plan to travel next week to New York, Chicago and Boston to meet with potential investors. Plans call for $388.7 million in bonds to be sold before the end of the year.