The Yankees will raise nearly $1 billion in a new bond issue through New York City to firm up their financial position as baseball attendance is projected to suffer through at least next season.
The New York City Industrial Development Authority will issue $923 million in PILOT Revenue Refunding bonds, which will refinance the remaining balance on the municipal bonds used to construct the new Yankee Stadium, which opened in 2009. The bonds are rated ‘BBB+’ by Fitch Ratings, which reflects the financial strength and fan enthusiasm for the Yankees as well as the very low likelihood of default.
The team isn’t rated higher because sports are subject to economic situations such as the pandemic, the ratings agency said in a note, which was released last night. “The strength of the Yankees as a premier franchise within MLB and in the robust New York City market have resulted in a history of strong fan support through previous economic downturns,” the statement said.
The Yankees have already executed financing this year that will allow them to meet all of the debt service and coverage requirements they have for the coming months, despite the lack of fans attending games in the Bronx, according to Fitch. While details on that financing aren’t available, the Yankees had sold $201 million in tickets for the 2020 season—money the organization either needs to refund to fans or credit toward future purchases.
The transaction also reflects an assumption that the pandemic will continue to hurt attendance through at least next season. Fitch’s attendance model assumes 2021 will continue to see fewer fans in the stands. Fitch projects next season’s attendance revenue will be just half of 2019’s—with their ratings for the Yankees assuming a worst-case situation of one-third the level of normal attendance. Even by 2024, the agency assumes Stadium revenue will recover to $231 million for the Bronx Bombers—about what it was in 2016, the lowest in the new Stadium’s history.
The NYCIDA is a government authority that issues tax-exempt municipal bonds for projects that boost economic activity. According to the authority’s internal calculations, the city will receive economic benefits of $71.4 million from the new bonds. The Yankees will save an undisclosed amount of money from the transaction too, presumably through lower interest payments. The city issues the bonds, which are paid by revenues the Yankees generate from stadium operations.