New York Mets' $613 Million of Stadium Bonds May Be Cut to Junk by Moody's 07/05/2009 |
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Municipal bonds sold in 2006 to finance the New York Mets’ Citi Field may be cut to speculative grade, or junk, status by Moody’s Investors Service after the surety bond provider, Ambac Assurance Corp., was downgraded.
Moody’s placed about $613 million of Queens Baseball Stadium LLC tax-exempt and taxable bonds sold through New York City’s Industrial Development Agency under review for possible downgrade. The debt, rated Baa3, the lowest investment grade, is backed by payments in lieu of property taxes, or Pilots.
The $82 million of bonds sold in January to complete the Mets baseball stadium that opened this season in the borough of Queens weren’t affected, Moody’s said in a release today.
“In the near to medium term, holders of the Series 2006 Bonds have considerably less liquidity protection relative to the Series 2009 Bonds bondholders, who benefit from a surety provided” by Aa2 rated Assured Guaranty Corp., analysts led by Andrew Cleary said in the release.
Under the 2006 documents, excess scheduled Pilots from the ballpark project will have to be transferred to a debt service reserve fund, which currently stands at zero, “as a substitute for the less creditworthy insurer” on the first round of debt, Moody’s said.
Rating Reduced
Ambac Assurance, a unit of New York-based Ambac Financial Group Inc., had its insurance financial strength rating cut to Ba3, the third-highest junk grade, from Baa1, the third-lowest investment grade, last month.
Moody’s said ratings analysts “will focus on efforts to restore protective liquidity to the Series 2006 bondholders” in deciding whether to downgrade the bond ratings.
Tax-exempt Mets stadium bonds sold in August 2006 to pay 5 percent and mature in 2046 were sold to a customer yesterday at a price of 79.1 cents on the dollar to yield 6.5 percent, Municipal Securities Rulemaking Board trade data show. The previous similar trade on April 30 was at 76.3 cents to yield 6.75 percent.
Similar-maturity Citi Field securities sold earlier this year with Assured’s backing to pay 6.5 percent last traded at 110.8 cents to yield about 5.08 percent on April 28.
“This is related specifically to Ambac and is not reflective of anything else related to club business or the strength of the underlying credit,” Mets spokeswoman Danielle Sessa Parillo said in an e-mail. “It has no impact on our operations.”
(Source: Bloomberg)
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