too long to post whole article: Houston Stadium Bond Refinance Looms as Swaps Squeeze Taxpayers Share | Email | Print | A A A By Darrell Preston, Edward Klump and Aaron Kuriloff Oct. 13 (Bloomberg) -- Harris County-Houston Sports Authority, which built the Texas city’s 71,500-seat National Football League stadium, may need to refinance $1 billion in debt and pay as much as $142 million ahead of schedule on bonds and interest-rate swaps. The agency, operator of Reliant Stadium for the NFL’s Texans, must pay $117 million over the next five years after JPMorgan Chase & Co. demanded accelerated retirement of variable-rate bonds due in November 2030, said J. Kent Friedman, the authority chairman. UBS AG may also get $25 million to unwind a swap designed to offset rising interest rates. The extra costs will push higher annual debt service by $20 million to at least $83.7 million in 2011 from $62.3 million this year. “This is like suddenly having to pay a 30-year mortgage in five years,” Friedman, a Houston-based partner in the law firm of Kelly, Hart & Hallman, said in a phone interview. “There are a lot of moving parts.” From New York to San Francisco Bay, government agencies have paid hundreds of millions of dollars to unwind bond-and- swap transactions officials initially said would cut borrowing costs. The deals fell apart when municipal-bond insurers lost their AAA ratings in 2008 and interest rates, instead of climbing, plunged to record lows in the worst credit crisis since the Great Depression. Houston’s stadium authority, granted taxing powers by voters in 1996, may be forced to refinance its bonds if car- rental and hotel taxes continue below estimates, Friedman said. With debt service at $62.3 million in 2008, the sports agency collected $79.3 million from all sources, including lodging and auto levies, according to disclosure documents. Overestimated Income The authority overestimated income from taxes to cover debt, said Jack Rains, the agency’s first chairman from 1997 to 1999, who also served as Texas secretary of state. “I’m deeply concerned about the financial stability of the sports authority and all its bonded indebtedness,” Rains said in a phone interview. “When you borrow for 30 years, you have to do prudent things, and they didn’t.” The agency’s $142 million in unanticipated payments would be enough to improve about 20 miles of new toll roads in Harris County, based on the cost of the Sam Houston Tollway widening project that will add two lanes to a 2.4-mile (4-kilometer) stretch of the highway around the city by 2010. http://www.bloomberg.com/apps/news?pid=20601103&sid=ar_NNbL0pGa4
I saw a story on this about two weeks ago. What happend, their financer was bought by another bank who has shortened the term thereby increasing the payments?
It's complicated, but reading it I think since MBIA (the bond insurer) got downgraded, now the market for their debt is limited (since some institutions can't hold MBIA backed paper due to the downgrade). Accordingly the remaining noteholders can pretty much dictate the terms.
