Citing concerns over the sale of a 49% stake in the Brooklyn Nets, Standard & Poor’s warns that the bonds that backed construction of the Barclays Center could be downgraded.
The Nets recently finalized a change in their ownership structure, as Joe Tsai purchased a 49% stake in the team from Mikhail Prokhorov. That transaction, which was announced by the Nets earlier this month, will give Tsai the opportunity to buy additional stakes in 2021 and potentially become the club’s controlling owner.
Not included in that transaction was the Barclays Center, which remains under the control of Prokhorov’s Onexim Sports and Entertainment. There are $527 million worth of bonds that helped pay for the arena’s construction, and they are currently rated at “BBB-.” That is the lowest level for investment grade bonds, and Standard & Poor’s recently indicated that the ownership structure change could lead to a lower bond rating. One of the issues, according to Standard & Poor’s, is how it affects the Barclays Center’s financial outlook. More from Crain’s New York Business:
The $2.3 billion deal may weaken the finances of Barclays Center, S&P said, because it calls for Barclays to collect only 30% of food and beverage sales from Nets games, down from the prior 100%. While the team agreed to set aside more than $300 million to make sure bondholders are paid, S&P said “preliminary calculations suggest that these features are not sufficient” to support an investment-grade rating for the bonds.
“We could lower the rating, potentially multiple notches,” S&P warned. The arena’s bonds are backed by luxury-suite premiums, signage and advertising, naming rights, concessions, a share of club-ticket and regular-seat sales, and merchandise.
It should be noted that this does not relate to upcoming plans for the New York Islanders, who have played home games exclusively at Barclays Center since 2015 but are planning to construct a new arena at Belmont Park. The Belmont Park arena is not expected to open until at least the 2021-22 NHL season, so the team is planning to split home games over the next three seasons between the Barclays Center and the Nassau Veterans Memorial Coliseum.
For the Nets, this marks the biggest change to the team’s ownership structure in several years, as Prokhorov originally acquired the controlling interest in the club in 2010. The Nets have played at the Barclays Center since 2012.