Anaheim Slashes Arena Debt Through Refinancing

Capitalizing on low interest rates, the city has slashed more than $34 million off the Anaheim Arena debt by refinancing the facility’s construction loans, officials said Thursday.

Additionally, the city is saving about $3.8 million by restructuring a separate debt on the land purchased for the arena. Those savings are being set aside in a special account and will be applied to the city’s potential $7.5-million liability, if no professional basketball team becomes a tenant within the first eight years of operation.

“Obviously, we caught the market at the right time,” Councilman Bob D. Simpson said Thursday. “Clearly, this was in the best interest of the city. I think it’s great.”

The financial maneuvering benefits both the city and its arena partner, Ogden Corp. Under their agreement, Ogden paid the arena’s $103-million construction costs in exchange for a 30-year operating lease. When the lease expires, the $125-million arena will be paid off and the city will own it.

With the refinancing, Ogden’s annual debt payment is substantially less. For example, in 1994 the payment goes from about $9.3 million a year to $7.1 million. The lower annual debt payment also means that the city and Ogden will be able to make a profit on the arena sooner.

But city officials were most pleased that they were able to reduce a financial exposure to the city’s general fund by refinancing of the debt on the $15.3-million land purchase. At one time, the city’s exposure was $20 million because it was obligated to pay Ogden $2.5 million a year for the first eight years if neither a professional hockey nor basketball team became an arena tenant.

That amount was automatically reduced to $12 million when Walt Disney Co.’s new Mighty Ducks franchise signed a lease to play in the facility. The liability was further slashed under a deal in which the city allowed Ogden to add about $19 million in improvements and hockey fees to the original $103-million debt in return for erasing the city’s first three years of financial exposure if no basketball team became a tenant.

In January, 1991, the city sold $103 million worth of certificates of participation for construction of the Anaheim Arena at a variable interest rate of 9.25%. The refinancing rate is at 5.625% for an estimated savings of $34.4 million over the life of the 30-year debt, City Manager James D. Ruth said.