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Winnipeg Free Press - PRINT EDITION

Phoenix coyotes Glendale's bonds for sale next week

By: Geoff Kirbyson

Posted: 02/11/2011 1:00 AM | Comments: 0 (including replies)

THE City of Glendale will put its much-ballyhooed bond issue up for sale next week in what could be the final step in preventing the Phoenix Coyotes from fleeing the desert and possibly returning to Winnipeg.

Details of the bond offering were put online Wednesday evening by Moody's Investors Service, the New York-based credit rating agency. There are two series of bonds, one looking to raise $107 million and a second looking to raise another $9 million. (All figures are in U.S. dollars.)

The bonds have been given a rating of A1, the lowest of the "A" ratings, and will officially go on sale Tuesday. The all-important interest rate to be paid on the bonds has not been released but it must be made public before the sale period begins. Industry speculation has the rate being pegged anywhere from six per cent to nine per cent.

In its report, Moody's downgraded Glendale's general obligation rating to Aa1 from Aa2 but revised its outlook on the city's general obligation and related ratings to "stable" from "negative."

"With the current offering, Glendale's direct and overall debt burdens remain high and are well above similarly rated cities across the nation. The city's direct debt burden of 4.8 per cent is nearly five times the national median of 1.0 per cent," Moody's wrote.

Glendale spokeswoman Julie Frisoni said the city would not comment on the bond sale.

"Except to say we are working on all those details and continue to move forward. We're not talking about dates or rates or anything like that," she said.

Glendale has pledged $100 million as part of the proposed $170-million deal for Chicago businessman Matthew Hulsizer to buy the Coyotes from the NHL. The city's plan is to raise the money through these bonds and receive the parking rights to the Coyotes' home rink in return.

Moody's noted the bond offering is subject to litigation risk from Arizona watchdog, the Goldwater Institute, which has threatened a lawsuit if it feels the sale of the Coyotes constitutes a "gift of public funds."

Goldwater issued a statement Thursday expressing its "grave reservations" about the bond issue.

"The city appears to be taking an extreme and possibly illegal gamble with taxpayer money," it said, adding it will provide a formal evaluation of the deal in the near future.

Charlie Spiring, CEO of Winnipeg's Wellington West Capital, said based on the assessment from Moody's, the bonds are a "risky" investment and should come with a high interest rate to compensate.

"The fact the bond issue is going ahead is good news for Glendale but the real test is ahead of them. Are people going to buy it? If it was at six per cent, I wouldn't touch it with a 10-foot pole. There's a fair amount of risk. You want to get paid when you're taking risk," he said, adding speculation is the bond will come out with a high single-digit interest rate.

Spiring said the bonds will more than likely be sold to institutions, not to retail investors. That part plays in Winnipeg's favour, he said.

"Institutions are pretty ruthless investors. They won't bend out of their good nature and say, 'Let's help out Glendale.' They'll want real return versus risk," he said.

geoff.kirbyson@freepress.mb.ca

Republished from the Winnipeg Free Press print edition February 11, 2011 A11

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