Harris County-Houston Sports Authority, which financed venues for three professional sports teams, dipped into reserves to reimburse insurers for $5 million they spent to buy back its bonds.
The insurers, MBIA Inc. and its reinsurer National Public Financial Guaranty Corp., were forced to buy the Series 2001C and 2001D variable-rate bonds by JPMorgan Chase & Co., the buyer of last resort required under the debt’s terms. The bank accelerated repayment after the global financial crisis led to a cut in MBIA’s credit ratings, according to Moody’s Investors Service, and after a stand-by purchaser for the debt was lost.
The Harris County authority is required to have a purchaser available to buy the debt from investors who no longer want it. The authority faces having to repay about $115 million of variable-rate bonds by 2014 rather than 2030, plus the cost of unwinding an interest-rate swap, because of JPMorgan’s action.
The authority disclosed the “unscheduled draws on credit enhancements and unscheduled draws on debt-service reserves” in a regulatory filing yesterday.
Moody’s had predicted the authority would be forced this month to use reserves when it cut the rating on $988 million of its debt to non-investment grade in August. It said the accelerated payments would reduce revenue available for debt service, resulting in a default as soon as March.
Moody’s reduced its senior-lien ratings on the authority in to Ba3, its third-highest non-investment grade level, from Baa2, according to a news release. Moody’s also lowered its rating on junior-lien debt to B2 from Baa3 and its grade on third-lien bonds to B3 from Baa3.
Standard & Poor’s cut ratings on $475 million of authority debt to junk in September. S&P reduced the authority’s junior-lien and third-lien debt by five levels to B, its fifth-highest non-investment grade, from BBB-, it said in a release. S&P confirmed its BBB rating on $399 million of senior-lien debt.
J. Kent Friedman, chairman of the authority, didn’t immediately respond to a request for comment.
The authority financed Minute Maid Park, home to the Houston Astros Major League Baseball team; Reliant Stadium, for the Houston Texans National Football League team; and Toyota Center, for the Houston Rockets National Basketball Association team.