S&P downgrades Yum! Center bond rating outlook to negative

Hold onto your wallet, taxpayers of Louisville. Despite Metro Council president Jim King’s “What, me worry?” attitude towards the Arena Authority’s inability to generate sufficient revenue to repay construction bonds for the Yum! Center — largely due to a pathetic TIF performance — Standard & Poors credit agency just brought the pain:

We are revising the outlook to negative from stable and affirming the ‘BBB-’ rating on the Kentucky Economic Development Finance Authority’s project revenue bonds issued for Louisville Arena Authority Inc. (LAA).

– The outlook revision reflects our view of LAA’s continued reliance on potentially volatile tax increment financing (TIF) revenue and uncertainty about stabilized operating costs and direct arena revenue under the new operator.

– Although the 2011 amendment to TIF calculations and the recent replacement of the arena operator have strengthened the project, we anticipate that U.S. multi-use arena operator LAA’s debt service coverage will remain low through the next two years.

Rating Action

On Dec. 7, 2012, Standard & Poor’s Ratings Services revised its outlook to negative from stable and affirmed its ‘BBB-’ underlying rating (SPUR) on the Kentucky Economic Development Finance Authority’s Louisville Arena project revenue bonds, issued for Louisville Arena Authority Inc. (LAA). Assured Guaranty Corp. (AA-/Stable/–) insures the senior bonds. The bonds consist of about $319 million series 2008A-1 fixed-rate bonds and series 2008A-2 capital appreciation bonds, and $20.1 million series 2008B taxable fixed-rate bonds. We do not rate the $9.9 million of taxable subordinate series C fixed-rate bonds.

The outlook revision reflects our view of LAA’s continued reliance on potentially volatile tax increment financing (TIF) revenue and uncertainty about stabilized operating costs and direct arena revenue under the new operator.

Looks like that additional $3.3 million from Metro government is going to happen. Unless they want even more from us than that…

Thanks Goldman Sachs!

2 Comments

  1. Puhn Tang
    Posted December 8, 2012 at 12:46 pm | Permalink

    Another example of the shining bucket of buttfuckery which is the city of Louisville. Another example of the difference between free market capitalism and governmental cronyism aka corporatism. Make a bad deal with hard nosed businessmen like Host or Ulmer and they’ll ram lawyers and bill collectors and judgements up your ass until bankruptcy may be your only recourse, and they won’t give a rat’s ass if you end up penniless in the streets. Let them fuck up, and the hat gets passed to taxpayers. In this case, it’s about phony financing of a glorified toaster oven looking shrine. YUM!, indeed, Louisville peasants. YUM! indeedy.

  2. Gordon Anchorage
    Posted December 9, 2012 at 10:59 pm | Permalink

    Rick’s temple is another example of the mindless copycat “ideas” of state and municipal economic development officials in America. While China is building infrastructure (high speed transit, broadband, etc.) public officials in America focus on sports venues. These expenditures have been shown to be of dubious economic value, yet every city in America continues to invest public funds and increase bond indebtedness to such schemes.
    I haven’t attended any events at Yum, and dont plan to in the future. The real richness and unique culture of Kentucky is in the land, the forests and rivers of our Commonwealth, not in our professional basketball teams.
    We would do well to protect and develop our natural heritage above all.