Steve Cohen has owned the New York Mets for three months and Wall Street bond rating analysts like what they’ve seen so far.
Cohen, a hedge fund manager who paid $2.4 billion for the team, has bolstered the balance sheet of the subsidiary that leases and operates Citi Field with a $50 million capital injection, according to S&P Global Ratings Inc. He’s moved quickly to sign all-star shortstop Francisco Lindor and pitcher Carlos Carrasco from the Cleveland Indians in an effort to turn around a club that finished tied for last in the National League East last year.
And next week, the Mets plan to take advantage of surging demand for lower-rated municipal bonds to refinance $540 million of debt issued to fund the construction of Citi Field more than a decade ago. The deal will reduce debt service payments by about $50 million over the next three years -- giving the ball club breathing room to weather the risks of reduced attendance because of the pandemic.
Holders of the new debt will benefit from an increase in the percentage of ticket revenue available to pay debt service by 40%, equating to about $43 million annually before 2020.
“In a short period of time we have actionable things you could point to that showed the impact of the change in ownership,” John Medina, a Moody’s Investors Service analyst said in an interview. Moody’s raised the ratings on Citi Field bonds one notch to Baa2, the second-lowest investment grade, on Jan. 28.
Strong demand for municipal bonds, coupled with scant new issues and an improving economic picture have driven prices on AAA rated municipal bonds relative to U.S. government securities to record highs. As a result, investors have poured into lower-yielding municipal bonds, pushing their yields down in turn.
Yields on municipal bonds rated BBB fell to 1.71% on Feb. 3, a record low, according to Bloomberg Barclays Indexes. Triple B rated state and local government debt now yields about 1 percentage point more than AAA bonds, the narrowest spread since March and just 0.3 percentage point more than pre-pandemic lows.
“With the vaccines there’s some light at the end of the tunnel,” said Dan Solender, head of municipal debt at Lord, Abbett & Co. “The money’s coming in and the expectation is that credits can only get better from here.”
The pandemic led Major League Baseball to cut last year’s season to 60 games from 162 and state and local health mandates barred fans from attending regular-season games. Citi Field’s revenue plunged to $28.2 million for the nine months ending Sept. 2020 from $148.7 million, according to a bond offering document. The stadium collects revenue from advertising, naming rights, and luxury suite premiums in addition to tickets, concessions and parking. The revenue is used to make payments in lieu of taxes, which back the bonds.
In spite of their poor record on the field, the Mets are the sixth most valuable Major League Baseball team, according to Forbes Magazine, valued at $2.4 billion, and the team ranked 13th in attendance, with 2.4 million. Last year, the Mets missed the playoffs for the fourth straight year.