Friday, April 16, 2010
New Nashville convention center's bonds sell fast
Metro finds heavy demand in $623.2M sale By Michael Cass • THE TENNESSEAN • April 16, 2010 The Metro Convention Center Authority has completed the sale of $623.2 million in municipal bonds to finance construction of the Music City Center, enjoying heavy demand from investors. Two series of bonds went on sale Tuesday, and each series was in enough demand to lower the city's interest rates. Metro's use of $571 million in federally subsidized Build America Bonds also helped lower the overall interest rate to 4.53 percent, "which is really low," Metro Finance Director Rich Riebeling said in an interview Wednesday. The rate is about 0.25 percent lower than what the city expected. "I have always been confident in our financing plan for Music City Center and in the viability of the project," Mayor Karl Dean said in a news release. "The market has now validated that confidence." Site set to open in 2013 Construction is already under way on the convention center, which is scheduled to open in 2013. Riebeling said the city will close on the transaction on April 21. After receiving the proceeds from the sale, Metro will pay off a $75 million bank loan for land acquisition, invest the rest and use it to build the convention hall. Construction itself will cost $415 million, with land acquisition, design work and other expenses driving the final price tag north of $580 million. The bond proceeds also will pay for a $40 million debt service reserve fund. The city plans to pay off the debt over the next 33 years with a series of revenue streams targeting visitors to Nashville. But it has pledged to use a $130 million-a-year pool of general fund revenues — excluding sales and property taxes — if there's a shortfall, as critics expect based on the struggles of convention halls around the country. Metro payments on the debt will average $39 million to $40 million a year. Opponents worry Fitch Ratings lowered Metro's general credit rating as a result of the convention center deal last week, writing that "even the moderate amounts of general fund support that appear possible for debt service and operations would contribute to increased strain on the government's finances." On Tuesday, the day the bonds hit the market, Bloomberg News quoted Councilwoman Emily Evans, a vocal opponent of the project, as saying it was "a riverboat gamble with very little upside." Evans, a retired municipal bond underwriter, told The Tennessean she wasn't talking about the bond sale. She said the Bloomberg reporter asked her why she was opposed to construction of the convention center, which the council approved by a 29-9 vote in January. "Nobody hopes I'm wrong more than me," she said. Supporters of the project say Nashville's appeal to tourists will generate enough visitor activity to pay off the debt with the dedicated revenue streams, leaving the general fund untouched. Riebeling said a trip he and Dean made to New York, Boston and the Philadelphia area last week appeared to have helped drive up demand for the bonds. They met mostly with insurance companies and large fund managers to talk up the bond issue, which was underwritten by Goldman Sachs, a New York investment bank. "I asked our financial adviser and Goldman Sachs, and they said there's no question that those trips took people from being lukewarm to being very positively inclined to take an order for the deal," Riebeling said.
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