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THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING
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Stadium called on time, budget
Experts hail innovative scheme for financing devised by Krafts By Meg Vaillancourt, Globe Staff, 2/8/2001
Even more impressive, financial specialists say, is how team owner Robert Kraft financed the $350 million his family is investing in the new stadium, scheduled to open next year.
With state aid limited to $70 million for road and sewer improvements, the Krafts are spending more of their own money to build a new stadium than any other franchise in sports history. But the team recently concluded an innovative financing plan that locks in historically low interest rates for not only the two-year construction period but the 25-year term of the loan.
As a result, the Krafts will likely save tens of millions of dollars in interest payments, while boosting the team's value.
''They figured out a very creative interest-rate hedge that no one else in sports has ever been able to use before,'' said Marc Gannis of SportsCorp, a Chicago sports business expert who negotiates stadium deals on behalf of municipalities.
''The bottom line is that it will not only save them millions of dollars, but allows the Krafts to afford a first-class stadium with all the bells and whistles ... ''
To complete the financing, the team first ''rented'' a top credit rating from Ambac, a publicly traded company that leases its triple-A credit rating to low-risk commercial and government entities seeking to lower interest costs. It was the first time Ambac had contracted with a professional sports team to cover the risk of a project that was 100 percent privately financed.
''We really had to prove we were worth it,'' said Patriots president Jonathan Kraft, who developed the unusual financing plan. ''It took a lot of time and effort, but we were able to convince them.''
Ambac reviewed the team's tight construction contracts, which require the stadium contractor to cover any cost overruns, and its debt and revenues streams. Ambac also took into account the NFL's financial stability and Kraft's 12-year track record in profitably running the antiquated Foxboro Stadium before deciding the Patriots were a good risk. Unlike commercial banks, which traditionally offer five- to seven-year construction loans, Ambac gave the Patriots a 25-year credit lease.
Armed with the best credit rating, the Krafts were able to access the cheapest commercial money pool in the world: the 28-day auction rate security market for AAA credit. The Patriots then entered into a rate swap contract with Salomon Smith Barney Inc. to roll over 28-day loans continually for 25 years. In effect, the team can take advantage of current low interest rates for the life of the stadium construction loan.
The Krafts declined to detail how much they paid Ambac and their investment bankers to structure the deal, but according to NFL sources, even with those costs, the Patriots saved tens of millions of dollars the team would have been required to pay if they had sought traditional financing.
Although complicated, the unusual financing package also allowed the Patriots to avoid antagonizing fans by imposing personal seat licenses - a financing mechanism frequently used to fund private investment in new stadiums, including possibly at the Red Sox's proposed new Fenway Park.
''To build a 100 percent privately financed stadium without resorting to [seat licenses] is a first,'' said Gannis. ''The Krafts have written a new book on stadium financing that provides a model for other teams to consider. They really broke the mold.''
In Foxborough yesterday, Governor Paul Cellucci stood alongside Robert Kraft and watched a crane put the first 42,000-pound concrete seating section in place at CMGI Field. The leading cheerleader for the new stadium during years of often tense negotiations with legislative leaders, Cellucci hailed the project as a boon to the Bay State's economy.
''This is an outstanding example of when the state invests in infrastructure dollars to leverage private sector investment,'' Cellucci said.
The new stadium is being built on the site of an old racetrack, 75 feet from the current stadium, which is scheduled to be demolished after the 2001 season. Three-quarters of the new stadium's steel frame is in place, and most of the 80 luxury suites are sold out.
Although they declined to provide specific sales figures, Patriots officials said sales of the 6,000 club seats are ''ahead of schedule.''
The premium seating, which includes year-round access to suites and meeting rooms, is the only way new Patriots fans can obtain seats. Season tickets have been sold out for years.
''A year ago, this was a cracked parking lot with lots of potholes,'' said Kraft. ''Today, we are standing in this edifice that, please God, upon completion a year from now will be ... the finest stadium ever built in this country.''
The 68,000-seat stadium is scheduled to open for New England Revolution soccer games in April 2002, and for its first football season that September.
The stadium is named for CMGI, the Andover Internet company that agreed in August to pay $114 million over the next 15 years for the naming rights.
Although CMGI's value has fallen sharply since, Kraft yesterday expressed confidence in chief executive David Wetherell's plan to turn the company around. Kraft said he expects the stadium will be christened CMGI Field as planned when it opens next year.
Meg Vaillancourt can be reached by e-mail at vaillancourt@globe
.com.
This story ran on page C1 of the Boston Globe on 2/8/2001.
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ne year after they broke ground, the New England Patriots say construction of the team's new privately financed football stadium is on budget and on schedule.