Yankee Stadium LLC 'BBB' Ratings Remain On CreditWatch
- S&P Global Ratings is keeping its 'BBB' rating on New York City Industrial Development Agency's (NYCIDA) aggregate $943 million series 2006 payment-in-lieu-of-taxes (PILOT) bonds, $259 million 2009A PILOT bonds, $25 million series 2006 rental revenue bonds, and $112 million series 2009 rental revenue bonds--issued for Yankee Stadium LLC (StadCo)--on CreditWatch with negative implications.
- We note StadCo's strong liquidity position. Its 2020 debt service obligations are funded and recently the project received a cash infusion from an affiliate that mitigates immediate liquidity concerns related to COVID-19.
- As with other baseball stadiums we rate, we are not updating our financial forecast at this time given the substantial uncertainty to the extent the 2020 and 2021 seasons will be played in front of fans.
- We expect to keep the CreditWatch listing in place through the summer given the unprecedented dislocation COVID-19 has caused for professional sports, especially baseball. We will also monitor liquidity as we see it critical that the recent infusion remain at the StadCo to meet its operating and debt expenses. We are reviewing the terms of the cash infusion and whether there could be an impact to StadCo.
SAN FRANCISCO (S&P Global Ratings) June 24, 2020—S&P Global Ratings today took the rating actions listed above.
Yankee Stadium is home to the New York Yankees and is located in Bronx, N.Y. The NYCIDA owns the stadium and leases it to StadCo. The lease provides for an initial term of 43 years that began in August 2006 and includes renewal options covering an additional 56 years. NYCIDA has a 99-year lease on the underlying land from New York City.
The 'BBB' rating on StadCo is based on the neutral liquidity position of the project, which has been recently bolstered by a cash infusion from an affiliate, which for now we assume is nonrecourse to the StadCo. The liquidity support is sufficient to address the unique operational challenges the pandemic has caused for stadiums. We consider the impact of the pandemic to be a health and safety issue, related to our environmental, social, and governance (ESG) factors.
An ample amount of cash liquidity was injected into the StadCo structure, preserving credit quality. In early June, a meaningful amount of cash was contributed from an affiliate to StadCo.
We view this cash contribution as credit supportive to the rating on StadCo by removing near-term uncertainty regarding how the StadCo will pay its next debt service payment due in February 2021 of approximately $101 million (including debt-related fees and expenses). The cash balances now held at StadCo ensure that, even if there are zero fan-attended games in 2020, StadCo has sufficient funds to support debt payments without drawing on dedicated reserves.
There continues to be uncertainty over when and how MLB games will resume due to the coronavirus pandemic. After over three months of negotiations, the MLB (representing the team owners) and the MLB Players Association have reached an agreement to play 60 games for the 2020 season with a start date around July 23-24. This represents a little over one-third of a normal season. With a season announced, there is still uncertainty of how many games will be fan-attended under unknown social distancing requirements. Despite generally strong coverages historically, we view baseball stadiums to be under significant rating pressure given the unprecedented COVID-19 pandemic and the recent stalemate that had occurred between the league and its players. This pressure is exacerbated as 2022 could be a strike year given the expiration of the collective bargaining agreement. There are also medium- to longer-term risks over the next year or longer regarding future fan demand for attendance if COVID-19 limits attendance due to social distancing.
The majority of ticket revenues were collected for 2020 and debt service for the year has been paid. Despite this, cancelled games in 2020 are leading to a growing quantum of credit balances potentially applicable to games in 2021 (for fans that do not opt for a cash refund--a key area that makes forecasting difficult).
For now, given the number of permutations, we have not quantified how many 2020 games will be played with fans or the size of potential credit balances that could roll over into 2021. While the number of ticket credits is unknown, newly injected cash on hand significantly reduces the operational and debt default risk of StadCo.
The final number of fan-attended games played this season (if any) will depend on social distancing requirements imposed by regional governments and residually the season proposed by the league. We need clarity on the lifting of public health restrictions for fan attendance at the stadium. The CreditWatch negative listing will remain until we assess the potential linkages between the cash injection from an affiliate and the StadCo, to ensure our debt forecast properly captures all risk borne to the StadCo. Once we have this additional clarity, we will update our financial forecasts and reevaluate the rating.
Environmental, social, and governance (ESG) factors relevant to the rating action:
- Health and safety
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- General Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009
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| Primary Credit Analyst: | David L Lum, San Francisco + 1 (415) 371 5013; david.lum@spglobal.com |
| Secondary Credit Analyst: | Antonio L Bettinelli, San Francisco (1) 415-371-5067; tony.bettinelli@spglobal.com |
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