Phoenix XXVII: Can we all get along?

[Jeffrey93]

There is no risk to buying the bonds re a lawsuit.

Your bond purchase is subject to the completion of the sale of the club.

The only risk is the lawsuit.

There is no direct link between the bonds being purchased from Glendale and the Phoenix Coyotes franchise.

If I buy bonds from Glendale I don't care what goes on with the Coyotes...I get my % promised when I bought the bonds.

If the bond sale is considered illegal due to a lawsuit from Glendale....I don't get my % promised when I bought the bonds.

At least that is how I understand it.

If there was no risk to created by the threat of a lawsuit...why would anyone care about the threat of the lawsuit? Hulsizer wouldn't have it in the deal that he walks if there is a lawsuit...and the interest on the bonds wouldn't because of the chance of a lawsuit.

 

[EkmanLarsson23]

According to a recent article published on azcentral.com, even if GWI takes Glendale to court they would most likely lose even if truly illegal. Reason being is they will rule the benefits outweigh the drawbacks.

 

[EkmanLarsson23]

Detroit's a better draw.

As is Chicago, Pittsburgh and Washington.

 

[Jeffrey93]

According to a recent article published on azcentral.com, even if GWI takes Glendale to court they would most likely lose even if truly illegal. Reason being is they will rule the benefits outweigh the drawbacks.

Pretty big gamble. Remember the OJ trial?

The gamble is bigger because, unless they have changed their minds, the NHL stated that if Goldwater challenges the lease and wins...Hulsizer can bail but the NHL has promised to keep the team in Phoenix for 7 years.

This might be bad interpretation on the writer's part as I saw this in an AZCentral article....but could you imagine? Goldwater wins a lawsuit..Hulsizer walks...and the NHL has promised this city the team will remain for 7 more years??? I thought they were in bad shape now...

 

[objectiveposter]

Lets just say, hypothetically, the bonds find buyers and sell on Monday. What exactly will happen after that assuming Goldwater acts?
Will the money immediately be transfered to Hulsizer to complete the deal? Will the money be frozen by the courts until the dispute is settled?

So if Goldwater decides on Monday that they have reviewed everything and think the deal is illegal, is there really a point for the NHL to keep working on the deal if they know it will get tied up in court?

with the threat of the lawsuit combined with the bonds not selling I just cant picture a scenario where the bonds sell and the court says the deal is legal all in a short period of time....or is there anothe option for glendale?

 

[OthmarAmmann]

Huh. I must say that if JP Morgan could not move the bonds but the NHL could do so in a matter of days, there will be a significant amount of taunting called for.

 

[Tommy Hawk]

The only risk is the lawsuit.

There is no direct link between the bonds being purchased from Glendale and the Phoenix Coyotes franchise.

If I buy bonds from Glendale I don't care what goes on with the Coyotes...I get my % promised when I bought the bonds.

If the bond sale is considered illegal due to a lawsuit from Glendale....I don't get my % promised when I bought the bonds.

At least that is how I understand it.

If there was no risk to created by the threat of a lawsuit...why would anyone care about the threat of the lawsuit? Hulsizer wouldn't have it in the deal that he walks if there is a lawsuit...and the interest on the bonds wouldn't because of the chance of a lawsuit.

You really should read the credit agencies reports when they downgraded CoG's current debt when they announced they were going to issue these bonds.

There are many posts that detail the reports and why their current debt was downgraded and placed on negative watch, which, has nothing to do with any threat of lawsuit.

You also must ask the question that if the revenues are truly worth that much, and more, then why doesn't the hedge fund manager just securitize the revenue stream himself.

According to a recent article published on azcentral.com, even if GWI takes Glendale to court they would most likely lose even if truly illegal. Reason being is they will rule the benefits outweigh the drawbacks.

The AZ constitution does not allow for benefits outweighing the costs. The AZ supreme court clarified in the City North case that you must get proper compensation for the money spent. It also does not allow the inclusion of factors such as estimated sales tax revenues, etc. that are not directly related to the item being purchased (i.e. the sales tax on the amount being paid for the parking), in this case the parking rights.

Lastly, and interesting point brought up by another poster, it does not allow a municipality to lend its credit as well. So if CoG is doing this because, as someone pointed out, their credit rating was better than MH and they would get a significant lower rate, even if the consideration was proper, if it was done in order to have CoG issue bonds instead of MH, that would be a violation as well.

 

[Tommy Hawk]

Please use the current logo... that old one is just intolerable...

That's better

Angry moose logo is better than the happy moose logo for sure!!

 

[AllByDesign]

The good news is that this day is an hour shorter, and that's gotta count for something.

 

[OthmarAmmann]

You also must ask the question that if the revenues are truly worth that much, and more, then why doesn't the hedge fund manager just securitize the revenue stream himself.

Most securitizations that I'm aware of exhibit declining cashflow over time rather than the increasing cashflow the parking fees exhibit. There could be securitizations that work that way that I'm not aware of. I would interested to see such a structure.

The AZ supreme court clarified in the True North case that you must get proper compensation for the money spent.

haha... funny slip

 

[Tommy Hawk]

Most securitizations that I'm aware of exhibit declining cashflow over time rather than the increasing cashflow the parking fees exhibit. There could be securitizations that work that way that I'm not aware of. I would interested to see such a structure.




haha... funny slip

The time warp messed up my sleep!!!

Securitization can be done with any type of cash flows. One thing that everyone seems to miss is that the further out in time you go, the more uncertainty is in the flows (and the higher the risk) and therefore, when using the time value of money that those flows should be discounted much more heavily than the flows for say the next 5 years This did not appear to be done by either Hocking or Walker. No one in their right financial mind would ever discount the entire stream at one rate.

 

[Fugu]

http://twitter.com/#!/JSportsnet

JSportsnet John Shannon
Please don't laugh...told today by multiple sources that the Bond Market is improving...and some positive vibes in team staying in Phx.
38 minutes ago Favorite Retweet Reply

Too bad this issue is now not so much about the sale of the bonds, but a potential lawsuit coming from the GWI.

As someone already said ^^^, I thought the issue was GWI unlawfully driving up the bond price, not that the markets were risk averse regardless.

Well which is it?

I really don't know one way or the other, but WHO is John Shannon, and how much credibility does he have (I'm asking earnestly, though it looks like it's from Sportsnet, but at this point, that in itself doesn't convince me of anything).

I doubt Daly calls him daily to give updates.

He'd be a great conduit for info that the NHL would want to pass on... When was the last time Shannon tweeted something negative? (And I do mean negative or disparaging?)

That'd be sweet. Can we call ourselves a 'Panel' though?

Yes, as along as no adjectives are added (e.g., like 'expert']

Huh. I must say that if JP Morgan could not move the bonds but the NHL could do so in a matter of days, there will be a significant amount of taunting called for.

There's private placement and then there's private placement.

 

[OthmarAmmann]

The time warp messed up my sleep!!!

Securitization can be done with any type of cash flows. One thing that everyone seems to miss is that the further out in time you go, the more uncertainty is in the flows (and the higher the risk) and therefore, when using the time value of money that those flows should be discounted much more heavily than the flows for say the next 5 years This did not appear to be done by either Hocking or Walker. No one in their right financial mind would ever discount the entire stream at one rate.

How does the SPV pay the notes in the early years of the deal? The coupons would have to be increasing because the assets wouldn't generate enough income for level coupons.

All ABS that I'm aware of (mortgages, leases, credit card receivables, etc) have decaying cashflow. Not trying to start a pissing match.... I'm genuinely curious.

 

[Fugu]

No one has any idea whatsoever. Could be about a billion, too.

Iwas expecting that from you. Do you care to submit a link to back up the billion dollar estimate.

We've been over this. Yawn.

Correction. You've been over this, and around the same time you question Thomson's net worth, iirc.

Let's just say I think Thomson is better material for pro sports team ownership. I honestly don't get how you can question a bonafide multibillionaire then imply that someone who has sniffed a billion in his life yet might actually be there.

You'd think a billion dollars [net worth] would be difficult to hide.

 

[Jet]

Yeah... lots of "fun" comments there.

However.... it's one thing if a regular member of the group is posting items from the GWI site. It's entirely another when the chief litigator of GWI, (and/or his wife, or someone using his wife's account ), does it.

It smacks of pandering.

Oh no doubt. It is at the very least in poor taste and very unprofessional. Makes this whole thing seem personal, which opens up a whole new can of worms don't it

 

[Tommy Hawk]

How does the SPV pay the notes in the early years of the deal? The coupons would have to be increasing because the assets wouldn't generate enough income for level coupons.

All ABS that I'm aware of (mortgages, leases, credit card receivables, etc) have decaying cashflow. Not trying to start a pissing match.... I'm genuinely curious.

You are misunderstanding the valuation and securitization of a cash flow versus funding/debt payment. The parking lot is not a debt that is paid down, it would be more related to an annuity type of situation for the life of the parking, which should be equal to the usable life of the arena.

If you have a cash flow over a epriod of time and you want to know what that flow is worth in present day currency, you take each future cash flow and discount it back to today. For example, 100 you are to receive today is worth $100. $100 you receive in 1 year would be worth less than $100 using x interest rate. $100 received in two years would be discounted at y interest rate. The interest rate for the first year (x) discount should be a lower interest rate for the second year (y) as the longer you go out time wise the greater the uncertainty associated with that payment therefore the need to have a higher discount. This why, in most cases, the yield curve is upward (higher rate the longer you go out). This is why you pay a lower rate for a 15 year mortgage than a 30 year mortgage.

So the estimated parking revenues in year 30 of say $15 million (pulling the number out of my hat) should be discounted at a much higher interest rate (say 12%) than one for next year. That $15 million in current day dollars is about $500k. At 6% discount it is worth 2.6 mil. HUGE difference. Even a change from 12 to 11% increases the amount to 655k.

So when these things go to court, everyone will trot out people who will swear the rate to be used should be x and the reasons are numerous.

The CoG is basing their $100 mill on a calculation as such. There are so many ways to value the parking revenues it is ridiculous. I could be a real optimist and use a low interest rate and higher future revenues or I could be a pessimist and use a high interest rate and a flat level of revenue.

 

[GoJetsGo55]

Can't remember if this has been answered or not but how does the COG plan to pay off the debt on the bonds?

They are stating that they can give MH the $100 million because they will raise that amount in parking fees. That leaves over $250 million that they don't have accounted for in bond debt.

When asked how they will pay the management fee, they mayor had no real answer. She said that fees and ticket surcharges would be used but that's barely covering the debt on the arena.

Now they need to pay management fees and bond debt to the tune of $25+ miillion/year on average for the first 5 years. The only way that this can happen is through additional fees. This leaves less wiggle room for MH to increase prices in his favor.

I guess they could always charge $100 per car for parking lol.

 

[GSC2k2*]

Explain why it isn't.
Further to this one phone call will verify this for you.

Before I answer, "one phone call"?

Do tell.

 

[Whileee]

Can't remember if this has been answered or not but how does the COG plan to pay off the debt on the bonds?

They are stating that they can give MH the $100 million because they will raise that amount in parking fees. That leaves over $250 million that they don't have accounted for in bond debt.

When asked how they will pay the management fee, they mayor had no real answer. She said that fees and ticket surcharges would be used but that's barely covering the debt on the arena.

Now they need to pay management fees and bond debt to the tune of $25+ miillion/year on average for the first 5 years. The only way that this can happen is through additional fees. This leaves less wiggle room for MH to increase prices in his favor.

I guess they could always charge $100 per car for parking lol.

The more stunning lack of transparency is the City of Glendale's fiscal plan to pay the $97 million in "arena management fees" over the next 5 years. Responses to this question by Mayor Scruggs have elicited nothing but inarticulate rebukes. Surely the public has a right to expect an explanation as to how their city council plans to pay for this. I think it is no wonder that the COG has become a rather easy target for those who decry fiscal irresponsibility and non-transparency in government.

 

[PitbulI]

The more stunning lack of transparency is the City of Glendale's fiscal plan to pay the $97 million in "arena management fees" over the next 5 years. Responses to this question by Mayor Scruggs have elicited nothing but inarticulate rebukes. Surely the public has a right to expect an explanation as to how their city council plans to pay for this. I think it is no wonder that the COG has become a rather easy target for those who decry fiscal irresponsibility and non-transparency in government.

Whilee, you know like I know. Scruggs said it's all in the lease as To Be Determined. It's good enough for Coyotes fans, why isn't that good enough for everyone else?

One question I haven't seen answered(Probably didn't look good enough) but wouldn't the COG be on the hook for the bond payments/interest, arena managment fee and loan payments on the arena too?

Sure, after 5 years Hullsizer could buy it but I doubt he would and give up the arena management/subsidy for Coyote losses deal.

But hey, the bonds could sell this upcoming week and then we all have to wait a year before COG is in big trouble when the budget comes out.

 

[GSC2k2*]

The more stunning lack of transparency is the City of Glendale's fiscal plan to pay the $97 million in "arena management fees" over the next 5 years. Responses to this question by Mayor Scruggs have elicited nothing but inarticulate rebukes. Surely the public has a right to expect an explanation as to how their city council plans to pay for this. I think it is no wonder that the COG has become a rather easy target for those who decry fiscal irresponsibility and non-transparency in government.

More strange to me is the question of what the allocation of monies in Glendale's budget has to do - even in the slightest way - with the Business of Hockey. I get the bond discussions, as it goes to whether or not the transaction will close, but is it really the case that anyone who is not a taxpayer of Glendale cares whether Glendale uses its reserves or raises taxes or cuts other costs from what may (for all we know) be a bloated city budget?

If they are really concerned, I expect that a thread should pop up in the HF political board (the unmoderated wild west of HFBoards)

 

[Fugu]

More strange to me is the question of what the allocation of monies in Glendale's budget has to do - even in the slightest way - with the Business of Hockey. I get the bond discussions, as it goes to whether or not the transaction will close, but is it really the case that anyone who is not a taxpayer of Glendale cares whether Glendale uses its reserves or raises taxes or cuts other costs from what may (for all we know) be a bloated city budget?

If they are really concerned, I expect that a thread should pop up in the HF political board (the unmoderated wild west of HFBoards)

It may have something to do with what backs the bond debt servicing if the parking revenues are insufficient.

 

[GSC2k2*]

Correction. You've been over this, and around the same time you question Thomson's net worth, iirc.

No correction, we've been over it. I don't think I was the only person in the conversation last time.

Let's just say I think Thomson is better material for pro sports team ownership. I honestly don't get how you can question a bonafide multibillionaire then imply that someone who has sniffed a billion in his life yet might actually be there.

As I explicitly mentioned in the last go-round, Thomson is more than wealthy enough to do whatever he wants. I was merely correcting a constant misstatement about the extent of Thomson's reported wealth. I am not sure what your last sentence meant; did you mean "not sniffed a billion" instead?

You'd think a billion dollars [net worth] would be difficult to hide.

You would be wrong IMO. I am certain that there are plenty of super-rich that fly well below the media radar.

 

[GSC2k2*]

It may have something to do with what backs the bond debt servicing if the parking revenues are insufficient.

I doubt it. The bond issuance provides for a debt servicing stabilization fund (they are borrowing more money than required to help pay the debt servicing in the transition years), but even then we are talking a couple of million in shortfall in an overall budget of several hundred million. Secondly, whileee is talking about the arena management fee. Who cares what the source is, for BoH purposes? Does it matter to the business of hockey if CoG raises taxes, or cuts services, or uses its reserves?

I submit the clear answer is "no".

 

[Fugu]

I doubt it. The bond issuance provides for a debt servicing stabilization fund (they are borrowing more money than required to help pay the debt servicing in the transition years), but even then we are talking a couple of million in shortfall in an overall budget of several hundred million. Secondly, whileee is talking about the arena management fee. Who cares what the source is, for BoH purposes? Does it matter to the business of hockey if CoG raises taxes, or cuts services, or uses its reserves?

I submit the clear answer is "no".

You may wish to cut off that portion of the discussion, but it's relevant on several fronts. The city's overall commitments directly affect their risk rating (as has been demonstrated by the recent Moody's rating). In other words, they have limited sources of revenue-- taxes (sales, property, etc.), sponsors/ads & parking, and.... debt. The thing about debt is that it has to be paid back, and usually more money is given back than what was borrowed <insert duh>.

So back to those first two items as far as income. Their debt and cost of operating appear to be greater than their income. Perhaps you have a different view? (oh, we may need to look at their income and budgets to decide that, right?)