Cebu_4_2
25th July 2013, 03:38 PM
New Red Wing Arena Should Be Unaffected by Detroit Bankruptcy
Article (http://blogs.wsj.com/moneybeat/2013/07/25/new-red-wing-stadium-should-be-unaffected-by-detroit-bankruptcy/)
Comments (10) (http://blogs.wsj.com/moneybeat/2013/07/25/new-red-wing-stadium-should-be-unaffected-by-detroit-bankruptcy/tab/comments/)
detroit (http://blogs.wsj.com/moneybeat/tag/detroit/)
By Melvin Backman
http://s.wsj.net/public/resources/images/BF-AF370_20dets_G_20130719163859.jpgA portion of downtown DetroitGetty Images
As Detroit settles in for a long, tortured trip through bankruptcy court, the public financing deal for a new arena to house the Red Wings will likely skate by intact.
“I don’t see this being the death knell of the arena project,” said Brian Holdwick, executive vice president for the Detroit Economic Growth Corporation, which is helping structure the deal.
Michigan’s state legislature approved Wednesday a $450 million bond offering (ttp://www.crainsdetroit.com/article/20130724/NEWS/130729926/state-approves-450m-in-bonds-for-red-wings-arena) that would form the public backbone of Ilitch’s Holding’s $650 million entertainment center and development district (http://www.ilitchholdings.com/Portals/0/Olympia-Development-PR-061913.pdf) near the heart of downtown Detroit.
The bonds will be floated by the Michigan Strategic Fund, which handles all of the state’s private development funds. The public, $283 million portion of the bonds will come from the Downtown Development Authority, which earmarks a slice of downtown property taxes for reinvestment there. They both have investment-grade credit ratings and function independently of Detroit’s city government, which makes their involvement in the deal important. Detroit’s credit rating is somewhere between junk status and radioactive.
“This isn’t a source of money that can be redirected to the city,” Holdwick said. The private portion of the MSF bonds will come from Olympia Development of Michigan, which is run by Red Wings owner and sports-and-pizza mogul Mike Ilitch. The rest of the money for the project will come from private sources.
The bonds will likely go to market early next year, but the deal still needs approval from a host of bodies, including the Detroit City Council and Wayne County Commission. Holdwick said a public, city council hearing on the bonds is set for September 5.
Joseph Krist, a fixed-income analyst for UBS (http://online.wsj.com/public/quotes/main.html?type=djn&symbol=UBSN.VX) who follows the public financing of sports facilities, echoed Holdwick.
“The deal will get done,” he said. “I would imagine investors will want to see how —if at all — the bankruptcy impacts the authority, both in terms of its ability to operate and whether it creates any hurdles.”
Krist said he expects investors will carefully watch Detroit’s bankruptcy to see if impacts the authority. Ultimately, Krist said he expects the stadium’s backers will convince investors to get past the shock of seeing the name Detroit on a bond offering and invest in the debt.
He imagines investors will request provisions like one commonly found in New York City offerings that puts property tax revenue in accounts set up to pay off debt before heading to city’s general funds.
“They will want to see it pass through as few hands as possible before it gets to the bond trustee,” he said.
Article (http://blogs.wsj.com/moneybeat/2013/07/25/new-red-wing-stadium-should-be-unaffected-by-detroit-bankruptcy/)
Comments (10) (http://blogs.wsj.com/moneybeat/2013/07/25/new-red-wing-stadium-should-be-unaffected-by-detroit-bankruptcy/tab/comments/)
detroit (http://blogs.wsj.com/moneybeat/tag/detroit/)
By Melvin Backman
http://s.wsj.net/public/resources/images/BF-AF370_20dets_G_20130719163859.jpgA portion of downtown DetroitGetty Images
As Detroit settles in for a long, tortured trip through bankruptcy court, the public financing deal for a new arena to house the Red Wings will likely skate by intact.
“I don’t see this being the death knell of the arena project,” said Brian Holdwick, executive vice president for the Detroit Economic Growth Corporation, which is helping structure the deal.
Michigan’s state legislature approved Wednesday a $450 million bond offering (ttp://www.crainsdetroit.com/article/20130724/NEWS/130729926/state-approves-450m-in-bonds-for-red-wings-arena) that would form the public backbone of Ilitch’s Holding’s $650 million entertainment center and development district (http://www.ilitchholdings.com/Portals/0/Olympia-Development-PR-061913.pdf) near the heart of downtown Detroit.
The bonds will be floated by the Michigan Strategic Fund, which handles all of the state’s private development funds. The public, $283 million portion of the bonds will come from the Downtown Development Authority, which earmarks a slice of downtown property taxes for reinvestment there. They both have investment-grade credit ratings and function independently of Detroit’s city government, which makes their involvement in the deal important. Detroit’s credit rating is somewhere between junk status and radioactive.
“This isn’t a source of money that can be redirected to the city,” Holdwick said. The private portion of the MSF bonds will come from Olympia Development of Michigan, which is run by Red Wings owner and sports-and-pizza mogul Mike Ilitch. The rest of the money for the project will come from private sources.
The bonds will likely go to market early next year, but the deal still needs approval from a host of bodies, including the Detroit City Council and Wayne County Commission. Holdwick said a public, city council hearing on the bonds is set for September 5.
Joseph Krist, a fixed-income analyst for UBS (http://online.wsj.com/public/quotes/main.html?type=djn&symbol=UBSN.VX) who follows the public financing of sports facilities, echoed Holdwick.
“The deal will get done,” he said. “I would imagine investors will want to see how —if at all — the bankruptcy impacts the authority, both in terms of its ability to operate and whether it creates any hurdles.”
Krist said he expects investors will carefully watch Detroit’s bankruptcy to see if impacts the authority. Ultimately, Krist said he expects the stadium’s backers will convince investors to get past the shock of seeing the name Detroit on a bond offering and invest in the debt.
He imagines investors will request provisions like one commonly found in New York City offerings that puts property tax revenue in accounts set up to pay off debt before heading to city’s general funds.
“They will want to see it pass through as few hands as possible before it gets to the bond trustee,” he said.