About $500 million of municipal bonds used for Staples Center in Los Angeles and arenas in four other cities that are home to National Hockey League teams may have their credit ratings reviewed by Fitch Ratings because of the canceled season.
The NHL ended the season Wednesday after locking out players for 154 days. Fitch analyst Chad Lewis said Thursday that the ratings might hinge on whether the league could avoid having to cancel next season.
"To the extent there's no season next year, that's when you start looking at a downgrade," Lewis said.
In addition to Staples Center, home to the NHL Kings, Lewis said the other arenas that might be reviewed were in Washington, Dallas, Denver and Toronto.
The Staples Center and Denver bonds are both rated A, sixth-highest of 10 investment grades, while the others were sold to investors in private offerings and don't have public ratings.
Lewis noted that Staples Center also hosted the National Basketball Assn. Lakers and Clippers, as well as concerts and other events. Investors who own the Staples bonds are further bolstered because principal and interest payments come from long-term contracts, he said, including naming rights, corporate sponsorships and luxury boxes.
"These are long-term contracts dedicated specifically to these bonds," Lewis said. "But if this year is canceled and next year is canceled, how are they going to go about remarketing all the suites? Can they raise or even maintain prices?"
The Staples Center bonds were issued in 1999 by L.A. Arena Co. to help pay for construction of the arena.