Standard & Poor's has cut the rating on $695.4 million on bonds issued to build Citi Field for the New York Mets to negative, or BB+, which is one level below investment grade.
The downgrade offers additional concerns for Mets owners, the Wilpon family, who are seeking refinancing, and as they are being sued for at least $300 million by the trustee representing the victims of convicted Ponzi-schemer Bernard Madoff.
S&P said it cut its rating on bonds for the stadium in Flushing, N.Y., because of poor performance by the Mets over the past three seasons, lower attendance, and competition from other venues.
We believe the project faces cash-flow volatility as a large portion of pledged revenues are game-day revenues with less than one-half of the revenues under short- to medium-term contracts, the New York-based bond-rating agency said.
More than 40 percent of Citi Field's revenue is secured by these contracts and the Mets are more dependent than other baseball clubs on revenue from premium season tickets, according to S&P.
As renewals and attendance have declined - 35 percent in the 2011 season alone - Citi Field's cash flow has declined as well, making assured bond repayments more risky.
The Mets sold the bonds to build Citi Field in 2006 as well as 2009 after their old home, Shea Stadium was torn down, with help from New York Mayor Michael Bloomberg's administration. Technically, the bonds were sold by a subsidiary, Queens Ballpark Co., which secured the previous stable rating.
In 2011, the Mets' revenue declined 12 percent and season ticket sales slumped 22 percent. Meanwhile, receipts from merchandise, as well as food and beverage receipts, both fell 20 percent, S&P found, raising doubts about the bonds. The Mets finished fourth in the NL East for the third consecutive year with a 77-85 record.
The agency also said it didn't believe a Mets projection that 2012 attendance would rise 9.1 percent, to 2.5 million.
Representatives of principal owner Fred Wilpon declined comment.
A $20,000 block of Mets stadium bonds backed by payments in lieu of taxes with a five percent coupon and maturing in 2046 traded after the downgrade at 83.3 cents on the dollar, to yield 6.2 percent, Bloomberg reported.