The New York Yankees baseball team will test demand today for lower-rated tax-exempt bonds with a $259 million municipal offering arranged through a city agency.
Yankee Stadium LLC is raising funds to finish the team’s $1.4 billion ballpark in the Bronx, after construction costs rose 43 percent, according to Standard & Poor’s. New York’s Triborough Bridge and Tunnel Authority also plans to sell $250 million in tax-exempt bonds to fund capital projects today.
Even with insurance, the Yankees may have to offer yields of 7 percent or more to sell 40-year bonds, based on trades this month for similar securities from the team’s first round of tax- exempt financing in August 2006. Bonds issued at 4.51 percent and due in 2046 fell in price to yield 7.05 percent Jan. 15, data from the Municipal Securities Rulemaking Board show.
“It’s a difficult environment for any credit that might not be deemed Aaa,” saidMike Pietronico, chief executive officer of Miller Tabak Asset Management in New York. “It’s going to require a concession. Most people see the weakening economy and the political wrangling that has gone on about this particular deal.”
Bond insurance on the Yankees’ deal will be provided by Assured Guaranty Corp., rated AAA by S&P and Aa2 by Moody’s Investors Service. The bonds carry underlying ratings of Baa3 from Moody’s and BBB- from S&P, the lowest investment grades. Goldman Sachs Group Inc. is managing the sale.
Top-rated state and local government bonds due in 30 years rose in yieldyesterday to 5.32 percent, the highest in more than two weeks, according to a daily survey by Concord, Massachusetts- based Municipal Market Advisors.
Stadium Critic
The Yankees franchise fielded months of criticism from Democratic New York State Assemblyman Richard Brodsky about public subsidies and the bond approval process, before the city’s Industrial Development Agency gave the final go-ahead to the deal Jan. 16.
The bonds are secured by payments in lieu of property taxes, or Pilots, made by Yankee Stadium LLC, run by Yankees Global Enterprises LLC, a 99 percent limited partner in the team.
About $184 million of the latest Yankee Stadium bonds will mature in 2049 and pay interest semiannually. The rest, known as capital appreciation bonds, will pay out their full return only upon maturities ranging from 2012 through 2047.
The Yankees are borrowing to fund added security measures, modifications for scoreboards and video screens, and structural upgrades at the stadium.
Mets Stadium
Also this month, the New York Mets won an $82 million authorization for a second round of Pilot bonds to complete that team’s ballpark construction in Queens. The bond sale for Citi Field, managed by Citigroup Inc., will come tomorrow, according to data compiled by Bloomberg.
Both New York stadiums will open in time for the beginning of Major League Baseball’s regular season in April.
Since the two teams started building new homes, the value of municipal bond insurance has declined as most firms in the industry were stripped of their AAA financial strength ratings.
Philadelphia, rated BBB by S&P and Baa1 by Moody’s, last month agreed to pay a yield of 7.25 percent on 30-year bonds insured by Assured Guaranty.
The yield was 140 basis points more than AAA general obligation bonds tracked by Municipal Market Advisors that day, compared with a premium of just three basis points at a similar insured sale by Philadelphia in April 2008, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.
Insured bonds have accounted for 10 percent of municipal offerings in 2009 through last week, down from 36 percent during the comparable period last year, according to data compiled by Thomson Reuters.
To contact the reporter on this story: Jeremy R. Cooke in New York atjcooke8@bloomberg.net.
