Securities Are Sold to Pay Arena’s Costs

Asset-backed bonds valued at $315 million have been sold to pay for construction of Staples Center, the sports and entertainment arena in downtown Los Angeles scheduled for completion this fall.

The securities are backed by revenue from office supply retailer Staples Inc. for the right to name the center, a portion of luxury box and premier seat licenses, and concession leases.

The 20,000-seat arena will be home to the Lakers and Clippers basketball teams and the Kings hockey team.

“This basically repays outstanding loans for construction so far and will help pay for the remaining construction,” said John Gillespie, managing director at Bear, Stearns & Co., which handled the sale.

The sale of the securities puts cash back in the hands of the center’s principal owner, Denver billionaire Philip Anschutz, though it reduces the revenue he will collect in future years. Anschutz also owns the Kings and is part-owner of the Lakers.

Construction of the center was financed earlier by L.A. Arena Funding, which is majority-owned by Anschutz, with a 40% stake held by News Corp.’s Fox Group.

The taxable bonds pay an annualized yield of 7.65%, with a final maturity in 27 years and an expected average life of 14.5 years. They were sold privately to large investors, including insurance companies, and are A2-rated by Moody’s Investors Service.

“The offering was particularly well-received,” said Lesley Goldwasser, a senior managing director with Bear Stearns. Investors “appreciated the fact that the Staples Center will be the premier sports venue in Los Angeles.”

The sale was the largest yet in the asset-backed market for a sports arena. It followed a $139-million sale in July for Pepsi Center in Denver, also handled by Bear Stearns.

Staples Center will also be home to an Arena Football League team, the 2000 Democratic National Convention and the 2002 U.S. Figure Skating Championships.