The New York Yankees are going to capitalize on the team’s long history of generating a lot of money at their ballpark to work with New York City to sell more bonds that will save the baseball team and the city millions of dollars in debt payments in what amounts to a refinancing of debt at lower interest rates.

This morning, Fitch Ratings released a report saying the New York City Industrial Development Agency (NYCIDA) plans to issue approximately $923 million in PILOT (payment in lieu of taxes) Revenue Refunding Bonds, Series 2020, issued for the benefit of Yankee Stadium LLC. The 2020 bonds will provide significant debt service savings relative to the prior schedules, with the majority of savings related to the PILOT and debt payments in February 2022-2024. The transaction also sets aside $50 million to be used to pay principal payments in the next few years.

While StadCo is still required to pay the full PILOT payment, amendments to the PILOT indenture between NYCIDA-StadCo for this transaction will allow all excess PILOTs to flow back to StadCo to be used to offset StadCo operating costs. Previously, excess PILOTs flowed back to StadCo subject to a 10% cap. This allows StadCo to offset a higher percentage of stadium operating costs, particularly in fiscal year 2022 through 2024 when debt service savings are greatest, which provides some mitigation on the pressure for a quick recovery in revenues from the coronavirus.

The Yankees are MLB’s most valuable team, worth $5 billion, and are the second-most-valuable team in all of sports, behind only the NFL’s Dallas Cowboys ($5.7 billion). By our count, the Yankees generated $470 million in ballpark revenue during the 2019 season, net of debt service (over $80 million in PILOT bond payments), the most in baseball. The closest team to the Yankees in ballpark revenue was the Boston Red Sox ($366 million).

Fitch assigned a BBB+ rating (expectations of default risk are currently low, and the capacity for payment of financial commitments is considered adequate) to the New York City Industrial Development Agency’s PILOT Revenue Refunding Bonds (series 2020, Yankee Stadium Project). Fitch has also affirmed the rating at BBB+ for the NYCIDA’s PILOT Revenue Bonds (series 2006 and 2009, Yankee Stadium Project) and the NYCIDA’s Rental Revenue Bonds (series 2006 and 2009, Yankee Stadium Project), issued on behalf of Yankee Stadium LLC with a stable ratings outlook.

Fitch’s analysis is conservative. The ratings assume approximately half of 2019 revenues in 2021 while the rating case assumes approximately a third of revenues in 2021. Because of the reduced debt structure and increased operating and maintenance refunds, Fitch expects that StadCo could still maintain break-even operations in 2021 under rating case attendance scenarios.

Through June 30, the Yankees had received approximately $201 million in ticket and suite revenues for the 2020 season. As of August 13, the team had refunded approximately $74 million to fans for games not played.

The Yankees will assign proceeds from all baseball tickets and suite license fees to StadCo, pursuant to the Assignment of Ticket Sale and Suite Lease Proceeds agreement. Under the terms of this agreement, StadCo will apply the assigned revenues to StadCo’s obligations under the lease agreement and PILOT agreement, including for payment of lease rentals and PILOTs, which serve as the source of revenues for payment of the Rental and PILOT Revenue Bonds, respectively.