Sports Authority credit rating falls to ‘junk’ status [Houston Chronicle]

Aug. 27--The Harris County-Houston Sports Authority has had its credit rating downgraded to "junk bond" status, complicating efforts to refinance debt that has it in a cash flow crunch.

"The lower ratings will have no effect on local property taxpayers, Houston's sports teams' ability to play in the stadiums, the city's ability to attract events to the facilities or the eventual repayment of bondholders," J. Kent Friedman, chairman of the Harris County-Houston Sports Authority's board, said in a prepared statement.

Moody's Investors Service already had considered Sports Authority bonds a "moderate" credit risk. The downgrades now make the bonds a "substantial" credit risk, according to the Moody's ratings system.

It makes borrowing more expensive, including refinancing.

The Authority has been looking for ways to refinance about $100 million in debt on which payments suddenly ballooned last year.

When analysts downgraded MBIA, the firm that insures the Authority's bonds, investors fled. JPMorgan Chase was obligated to buy them up under its contract with the Sports Authority. The contract enabled the bank to demand that the Authority pay back the money in five years instead of 23, requiring annual payments of $24 million.

Moody's cited the accelerated payments in announcing the downgrade.

"The Sports Authority has had a long-term revenue problem and clearly this is just another sign that default is looming," former Harris County tax assessor Paul Bettencourt said. "When you get downgraded below investment grade, that's generally recognition of the obvious that your revenues don't match expenditures."

Bettencourt suggested it could put county taxpayers on the hook, an assertion county finance officials and Sports Authority leaders firmly deny.

Friedman said financial institutions have brought about half a dozen potential refinancing plans to the Authority in the past year, but none were accepted. The downgrade, Friedman acknowledged, "makes it more difficult and less likely that we'll be able to refinance."

The Sports Authority was set up to manage the $1 billion in voter-approved debt that financed the construction of Minute Maid Park, Reliant Stadium and the Toyota Center. The Authority uses hotel and car rental tax revenue to cover the payments.

This week's credit rating downgrade will not affect construction of a new professional soccer stadium downtown because the Houston Dynamo is paying for most of the $80 million project.

"Our elected officials who created the Sports Authority in 1997 could not have predicted today's economic recession and MBIA's rating difficulties, but they did an outstanding job of structuring the Sports Authority for just this sort of occurrence," Friedman said.

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