The vote taken by the authority on Friday authorizes officials to take a closer look at conducting a bond refinancing on the arena. Bank of America Merrill Lynch and Siebert Cisneros Shank were tabbed to oversee the process, which could allow the authority to lower the annual interest on debt payments through 2042.
With this decision, the authority has put one component into place that is needed to start to looking at dropping the cost of its annual payments, something that it says must be done in the coming years. Authority chairman Scott Cox, however, emphasized that additional work needs to be done to ensure that refinancing is a realistic option when it comes to the state of the KFC Yum! Center. More from the Louisville Business Journal:
Previous estimates have indicated tens of millions in interest savings if the arena authority can lock down an investment-grade rating, but Cox said there is zero chance of landing an investment grade rating if the arena authority doesn’t find additional revenue to cover the debt payments.
The authority did not release a timetable for moving ahead with the bond refinancing because it is awaiting legislation at the state level that would expand the arena’s tax increment financing from 20 years to 30 years, which better aligns with the life of the Yum Center bonds.
The authority still owes hundreds of millions in outstanding principal and interest payments, and those annual payments are set to increase in the coming years. Those payments are scheduled at $23 million for 2017 but will steadily increase each year to a peak of $37 million in 2029 before falling back to $23.5 million in 2030.
Cox said Kentucky Gov. Matt Bevin and state legislators are committed to finding solutions that will take care of the arena’s financial concerns for good, and he expects a bill to extend the TIF will be finalized in the next week. Once the bill emerges, he said, he is confident it will pass.
The authority also is negotiating with Louisville Mayor Greg Fischer and the Louisville Metro Council to possibly remove a cap on how much the city could pay toward the arena each year. Louisville Metro Council approved a resolution in December that gives Fischer the power to negotiate a new plan to help pay the Yum Center’s debt.
There are multiple entities involved in the process, including Louisville Metro, the arena authority, the state, and the University of Louisville. Despite some previous concerns expressed by the university, The Louisville Business Journal reports that Cox believes the school will cooperate in the process, and that “he is confident a new contract will be reached with U of L because both organizations want the arena to be financially successful.” The arena first opened in 2010.