Coyotes sign sweetheart arena lease, arena bondholders run screaming

The buyers of the Phoenix Coyotes signed their new lease on Monday guaranteeing them $15 million a year in public operating subsidies in exchange for mumble mumble something something, and the city of Glendale is already reaping the rewards:

At the beginning of the year, Glendale, Arizona restructured the debt it took on for Arena, issuing $39.5 million of senior-lien notes backed by the city’s excise tax. Proceeds of the bonds will refund debt used to build the $220 million arena (Glendale still owes $152 million) that opened in 2003, and are structured to provide budget relief by reducing near-term debt service requirements. Those bonds have been hammered, with their yield jumping to $4.35% from 3.33% since January.

Much of that jump came before Monday, no doubt, but Forbes’ Michael Ozanian says bond buyers are looking askance at the Glendale arena bonds with good reason: Not only can the Coyotes leave after five years if they’re losing money, but even the shares of arena revenue that new owners George Gosbee and Anthony Le Blanc have promised to share with Glendale aren’t guaranteed. But hey, at least the struggling mom-and-pop businesses at the local mall like Johnny Rockets and the Cold Stone Creamery can rest assured of some of the Coyotes’ 500,000 fans a year wandering past before or after games. For the next five years, anyway. Unless there’s another lockout.

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4 comments on “Coyotes sign sweetheart arena lease, arena bondholders run screaming

  1. Not saying I’d be knocking over old ladies to get in line to buy bonds on the Glendale arena, but Ozanian seems to enjoy trashing NHL finances.

    This seems to be all about the 5-year out clause. If the Coyotes leave, it seems plausible that Glendale would default on the arena. Bond buyers who bought earlier this year were probably expecting something closer to the Greg Jamison deal, which I believe did not have the out clause.

  2. As long as you can buy a swing vote the coyotes will continue play ice hockey in the desert.

  3. Anyone dumb enough to buy a Glendale city bond at just 4.35% is dumb enough to be a city councillor.

    “structured to provide near term relief”. The city pays relatively little in the first five years (which is good because it doesn’t have any money left), then gets hammered for the remainder of the term… when it still won’t have any money to pay.

    Defaulting seems unlikely to me, Ben, but I agree it’s not impossible.

  4. “If” they’re still losing money in five years?

    I just spewed coffee all over my computer screen.

    Sacramento, this is your future. One billion dollars between that team and arena, and an annual $20M bond payment. There won’t be enough return on investment for both the team and the arena to make money. Guess who’s getting the short end of that deal. We even structured it that way, with rent based on profits.

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