New York, January 28, 2021 -- Moody's Investors Service ("Moody's") has upgraded
to Baa2 from Baa3 the ratings on Queens Ballpark Company, LLC's
("Ballpark") outstanding PILOT, Lease revenue and installment
purchase bonds. Concurrent with this action, Moody's
has assigned a Baa2 rating to the $508.9 million PILOT Refunding
Bonds, Series 2021A (Queens Baseball Stadium Project) and the $50
million PILOT Refunding Bonds, Series 2021B (Queens Baseball Stadium
Project) (Federally Taxable), issued by the New York City Industrial
Development Agency, NY ("NYC IDA" or "Issuer").
The outlook is stable. These actions conclude the review for upgrade
initiated on December 17, 2020.
Bond proceeds will be used to refinance all outstanding PILOT Revenue
Bonds for savings that reduces annual debt service each year with no extension
of maturity. The 2021B bond proceeds will fund an interest reserve
that will be drawn to materially reduce the amount of annual debt service
costs required to be paid from annual cash flows for the next three years,
providing room for demand to recover over several years.
Upgrades:
..Issuer: New York City Industrial Development Agcy,
NY
....Senior Unsecured Revenue Bonds,
Upgraded to Baa2 from Baa3
....Underlying Senior Unsecured Revenue Bonds,
Upgraded to Baa2 from Baa3
Assignments:
..Issuer: New York City Industrial Development Agcy,
NY
....Senior Unsecured Revenue Bonds,
Assigned Baa2
RATINGS RATIONALE
Today's rating action reflects the credit benefits of [1] the
amendment to the Stadium Use Agreement that notably increases Ballpark's
revenues that are ultimately available for debt service; [2]
the strength of new ownership that has both proven its equity support
by bolstering Ballpark's balance sheet liquidity to date,
which we expect to continue if needed, and taken other swift actions
at the team level to support a solid on-field product moving forward;
and [3] the additional resiliency from the planned debt refinancing
that collectively address potential short term and longer-term
uncertainties owing in part to COVID related events. Moody's
cites improved governance as a key driver of this rating action as part
of our environmental, social and governance (ESG) considerations
owing to the credit positive actions that new ownership has taken to date.
The planned PILOT bond refinancing contemplates the issuance of a small
amount of new taxable debt that is used to reduce PILOT debt service from
2021 to 2023 to provide the stadium time to recover from COVID related
events while still generating strong debt service coverage ratios (DSCR)
for bondholders. Given the materially lower expected interest costs
on the sizeable amount of refunded debt, there is a step wise reduction
in both total and annual debt service post sale, increasing resiliency
over the life of the bonds. This additional cushion, in both
the near and long-term, balances the uncertainty related
to the level of in-person fan attendance at home games in 2021
and thereafter, as well as the uncertainty around the willingness
of fans to attend games in person in the future.
Steve Cohen's purchase of the New York Mets and Queens Ballpark Company,
LLC is credit positive for Ballpark in the near term as the Ballpark requires
equity support owing to the material interruption of revenues amid the
COVID-19 pandemic. Cohen has demonstrated this support by
bolstering Ballpark's balance sheet liquidity through a sizeable
cash infusion while also building additional near-term liquidity
through the current refinancing as well. Cohen is expected to continue
to provide liquidity support to Ballpark, if needed, because
of the stadium's long-term revenue generating potential that contributes
to the high franchise value of the team. While Ballpark benefits
from the sizable increase in ownership liquidity, bondholders continue
to benefit from a surety funded debt service reserve fund sized at 150%
of maximum annual debt service.
Cohen has also demonstrated his commitment to the local community and
the Mets organization through a sizeable donation to programs developed
by the New York City Economic Development Corporation to support local
small businesses, by funding payments made to seasonal Ballpark
employees displaced during the 2020 season, and through the restoration
of salaries following COVID related reductions.
Cohen has also demonstrated a strong willingness to utilize his sizeable
financial resources to support the team on the field by both hiring an
established president to run the team and by acquiring all-star
level talent through trade and free agency. The propensity to spend
money to improve the on-field product bodes well for future attendance
levels which have historically fluctuated in tandem with the success of
the team.
The Baa2 rating continues to reflect the strength of the Mets franchise
located in the strongest and most affluent media market in the US,
coupled with the team's non-relocation agreement that ties the
team to the stadium for essentially all home games, providing a
good degree of cash flow predictability for stadium operations and debt
service. The headroom in the capital structure, reflected
in high annual DSCRs, provides room for the stadium to absorb revenue
variability related to the inherent cyclicality of the sports industry
that is balanced against the team's long history of demand and resilience
through variable team performance and economic cycles. The rating
further reflects the sound project financing protections that includes
the inability to accelerate the debt service on the PILOT bonds and an
18-month debt service reserve fund.
RATING OUTLOOK
The stable outlook reflects our expectation that Ballpark will have adequate
balance sheet liquidity through proven equity support, the benefits
of the planned refinancing and the reduced near-term fixed debt
service costs that collectively offset the potential uncertainty related
to the pandemic, future demand and any potential issues negotiating
the players' collective bargaining agreement that expires on December
1, 2021.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
FACTORS THAT COULD LEAD TO AN UPGRADE
• Long-term, the rating could be upgraded if DSCRs consistently
exceed 3.5x on a sustained basis when debt service costs level
out starting in 2024
• A material reduction in total leverage
FACTORS THAT COULD LEAD TO A DOWNGRADE
• Demand does not recover and remains permanently weaker than historical
experience, resulting in DSCRs consistently below 2.0x on
a sustained basis
• Prolonged disruption in revenues and lack of ownership equity support
that results in a draw on reserves
PROFILE
Queens Ballpark Company, LLC ("Ballpark") is a special purpose entity
leasing, operating, maintaining and managing Citi Field,
the home stadium of the New York Mets. Approximately 95%
of the equity of Ballpark is indirectly owned by the New York Mets owner,
Steve Cohen. The New York City Industrial Development Authority
is the Issuer for the outstanding bonds, owns the facilities,
and has a 99-year ground lease with New York City for the land.
The NYC IDA leases Citi Field to Ballpark, which makes it available
for the Mets' use under the Stadium Use Agreement.
Ballpark is obligated to make Payments in Lieu of Taxes ("PILOTS") to
the NYC IDA in an amount no greater than what the property taxes would
be on the property, and to make certain other rental payments.
Ballpark also purchased, on an installment basis, from the
NYC IDA, certain equipment, fixtures and severable tenant
improvements to be used in conjunction with its use of the stadium.
The NYC IDA has pledged the PILOTS, installment purchase payments,
and rental payments to the PILOT bonds, installment purchase revenue
bonds, and the lease revenue bonds, respectively. Ballpark
transfers its semi-annual PILOT payment owed to NYC IDA to the
trustee in June and December, prior to the debt service payment
dates in July and January.
METHODOLOGY
The principal methodology used in these ratings was Generic Project Finance
Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1194215.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
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and whose ratings may change as a result of this credit rating action,
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Exceptions to this approach exist for the following disclosures,
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to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
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available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
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for additional regulatory disclosures for each credit rating.
John Medina
VP - Senior Credit Officer
Project Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
A.J. Sabatelle
Associate Managing Director
Project Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
