The agency that owns and operates McCormick Place will approach its long-awaited financial restructuring next week with its debt ratings intact.
The three major rating services held the line on their respective ratings of Metropolitan Pier and Exposition Authority expansion project debt in reports issued Monday and today, ahead of an anticipated negotiated sale of $1.18 billion in bonds on Oct. 6.
“We are pleased with having the ratings reaffirmed,” said Richard Oldshue, the authority’s chief financial officer.
The agencies’ assessments vary. At the upper end, Standard & Poor’s Ratings Services affirmed its top AAA rating on existing McPier debt and applied it to the new bonds as well. Fitch Ratings assigned its AA-, which is at the lower end of its high-quality category. Both agencies described the outlook for future ratings as stable.
The authority’s existing and future debt is paid back with various tourism-related taxes, and when those fall short, as they have since fiscal 2008, the difference is made up with state sales taxes. Both Standard & Poor’s and Fitch cited the substantial level of state back-up in their rating reports.
On the lower end, Moody’s Investors Service assigned an ‘A2′ rating, which is middle-range, five rungs above junk status. It assigned a negative outlook, citing the state’s deteriorating financial condition.
That prognosis triggered concern from one observer.
The state’s fiscal crisis continues to drag down its sub-units, said Laurence Msall, president of the Civic Federation.
Until the state “comes up with a comprehensive plan to fund pensions and balance its budget, we will continue to see negative outlooks and downgrades for state and local governments,” Msall said. “The cost is tremendous.” A recent federation study found Illinois residents will pay as much as $551.3 million extra for the state’s borrowing over the last year because of its deteriorating bond rating.
The McPier bond issue will allow the authority, a state-city agency known as McPier, to restructure about $900 million of its existing debt, extending its payment schedule by another eight years in order to reduce its annual obligation. Tourism taxes are expected to be sufficient to meet the reduced annual cost, ending the use of the state back-up.
The issue also will provide about $200 million for capital projects, primarily a long-stalled addition to the Hyatt Regency McCormick Place, which McPier owns.
The debt restructuring represents the another major step toward revamping operations. Last month, McPier rolled out show-floor changes, from cost cuts in electrical and food service to revised show-floor rules aimed at enabling exhibitors to cut their costs by doing more of their own set-up work. The new state law called for those changes.
The authority also is moving toward hiring a private manager for McCormick Place, a process expected to be completed next May.
