Arena Development Proposed Changes to Financial Structure DAVID L. - - PowerPoint PPT Presentation

Arena Development

Proposed Changes to Financial Structure

DAVID L. HANSEN, CITY MANAGER SEPTEMBER 27, 2016

Overview

 Status of Deal  City Council Conditions  Path Forward

Development Agreement: Approved December 2015 Proposed Amendments

Arena 15,500 seats, expandable Unchanged Approximate Cost $200 Million Unchanged Lease Term 60 years, $1 year Unchanged Financing Method Bank Loan-Chinese lender Bond Sale-VBDA conduit, neither City, VBDA nor Commonwealth responsible for payment

• f debt

Amount Financed $170 Million Up to $240 million, includes debt service reserve, capitalized interest during construction period, and costs of issuance Development Team Contribution $40 Million >$20 million, including at least $7.5 million toward cost of construction Arena Fund Payments 1¢ of hotel tax, plus taxes generated at arena Maximum of $14.6 M per year for 33 years Unchanged City Cure Rights in event of Developer Default Yes, at City’s election Unchanged Deadlines for financing, construction and opening Financing Commitment 11/8/16 Closing 9/8/17 Construction 7/8/18 Opening 10/1/19 All dates extended 60 days

Deal Overview: Then & Now

Conditions Description Detail Comment

Maximum Amount Financed No more than $200 Million for construction or the actual guaranteed maximum price for the design-build construction contract, whichever is less; plus capitalized interest on a drawn- down basis, debt service reserves and issuance costs. Financing limited to no more than $ 240M estimated as follows: $192.5M Construction Cost $ 16.0M Debt Service Reserve $ 24.0M Capitalized Interest $ 7.2M Issuance Costs $239.7M Capitalized interest calculated on step up basis rather than draw down basis. Otherwise Consistent. Previous Expenditures/ Development Fee The amount financed shall not include any previously incurred expenditures by USM or any development fee payable to USM. No bond proceeds dedicated to previously incurred expenses. No development fee included. Consistent Maximum Payment Cap Maximum Payment Cap shall not change, including the maximum annual payment amounts and the maximum 33 year term of such payments. No change. Consistent Feasibility Study A complete independent financial feasibility study shall be provided. Feasibility Study provided. Consistent

City Council Conditions

Conditions Description Detail Comment

Indicative Rating Letter/ Investment Grade Rating An indicative rating letter from a major rating agency shall be provided. The bonds are anticipated to carry an investment grade from

• ne of the three major rating

agencies. No indicative rating letter provided and bonds to be sold unrated. Developer to increase equity contribution by $7.5 million to

• ffset risk of unrated bonds.

Proposed modification to condition. City, VBDA and Commonwealth not

• bligated to repay

bonds Repayment of the bonds shall not be a general obligation of the City, Development Authority or the Commonwealth of Virginia. Documented in transaction documents. Consistent City Protections and Cure Rights All previously agreed protections and cure rights of the City to remain. Documented in transaction documents. Consistent Arena Operator SCG AEG

City Council Conditions (cont’d)

Path Forward

 Special Meeting and Vote by Development Authority (tentatively October 4)  City Council Public Hearing and Vote (October 4)  Bond Issuance