Legal problems incoming for Louisville | Page 2 | The Boneyard

Legal problems incoming for Louisville

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FDNY99 said:
One would hope...because if not UL will have pulled off the ultimate boiler room scam on the City of Louisville and the taxpayers. They get an arena for pennies on the dollar and don't have to deal with the ramifications of defaulted bonds. Make no mistake Upstater...after reading the second link these bonds are going to default whether that contract is rewritten or not. Moody's wouldn't have rated them as junk status if they weren't. That is the real issue here...and UL (specifically Jurich) has it's hands DEEP in that cookie jar. In the world of academia/AAU and the such I very much value your opinion. But unless you have suddenly changed careers into Government Finance or Municipal Bond Sales I am going to have to defer to my wife on this one...again she has been a Finance Director of a municipal government since the late 80's with experience working for both a distressed municipality and a Moody's AAA rated municipality.
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This.

Moody's does not rate Muni bonds as junk unless there is an almost certainty there will be a default tied to them.

The reality is that the taxpayers will swallow the losses while Ville gets a brand new arena for pennies on the dollar
 
Actually, these are revenue bonds, not General Obligation bonds, at least it appears that's the case. So the Louisville taxpayers might not get stuck directly. It isn't like they'll have to raise taxes to cover the bond payments. though most of these deals are pretty complex and sometimes there is at least a partial municipal 'backstop.' It will probably make it pretty difficult for Louisville to issue revenue bonds again for a while.
 
FDNY99 said:
Basically in a nutshell what my wife told me last night after reading the second link is this: With the bonds being rated as junk status it doesn't bode well for the municipality. In the end those bonds were issued on the taxpayer's dime..with the municipality ultimately being responsible for repayment. She found that clause giving UL the right to purchase the arena if bonds are defaulted VERY interesting. Basically in the end...the taxpayers of Louisville will be pitted against UL in this.
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This seems 100% intentional.
 
freescooter said:
Actually, these are revenue bonds, not General Obligation bonds, at least it appears that's the case. So the Louisville taxpayers might not get stuck directly. It isn't like they'll have to raise taxes to cover the bond payments. though most of these deals are pretty complex and sometimes there is at least a partial municipal 'backstop.' It will probably make it pretty difficult for Louisville to issue revenue bonds again for a while.
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The bonds were issued by the Louisville Arena Authority, not the City of Louisville. The City's credit/bonding rating is not at risk.
 
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FDNY99 said:
Basically in a nutshell what my wife told me last night after reading the second link is this: With the bonds being rated as junk status it doesn't bode well for the municipality. In the end those bonds were issued on the taxpayer's dime..with the municipality ultimately being responsible for repayment. She found that clause giving UL the right to purchase the arena if bonds are defaulted VERY interesting. Basically in the end...the taxpayers of Louisville will be pitted against UL in this.
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This Is My Take As Well. That Is Why I Say It Sucks For The Tax Payer, But They Are Not Powerless. They Can Put Tremendous Pressure Louisville, In The End Though, I Think Too Many People Down There Love The Cardinals To Cause Too Much Havoc. Ul, If They're Smart Will Reach A Middle Groun That Is Slightly Less Favorable.
 
CardinalZen said:
The bonds were issued by the Louisville Arena Authority, not the City of Louisville. The City's credit/bonding rating is not at risk.
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Are you saying this is a State authority? Obviously it's not a private entity. Under whose auspices is it housed? Sounds like a State concern, since most "authorities" are related to the state. If so, it's Kentucky's credit rating that will get dinged in a default.
 
This was an independent authority created under State of Kentucky enabling legislation. There are lots of them, usually created for some special purpose, in almost every state. Those entities often have the ability to issue tax exempt bonds, and sometimes taxable bonds as well, for specific purposes. The bonds are typically revenue bonds, as opposed to general obligation bonds. They are not backed by the full faith and credit of the State or a municipality, but rather the source of payment is the revenues from the project. The easiest example is something like a highway authority. When it wants to build a new bridge over a river, it issues bonds. the source of repayment of the bonds isn't the general tax revenues of the state, but the tolls people pay to use the bridge. Most of the major New York-New jersey Hudson Crossings, and the Delaware Memorial Bridge between New Jersey and Delaware were built using this model. In the case of the Yum Center, the Arena Authority issued the bonds, to be paid off from the increased revenues from the taxes generated by new development. I have read that the city also guaranteed up to $10 million, which might suggest that nobody really thought this deal would work, so they are on the hook for that. by the way, because this is a revenue bond deal explains why the interest rates are as high as they are. these deal do in fact have more risk than G.O. bonds. The collapse of this deal, if it happens, wouldn't directly impact either Louisville or the State, but it could make it harder for other public authorities to borrow, especially for arenas and the like.
 
This is exactly correct. The Louisville Arena Authority is actually setup as a now profit, non stock corporation and the bonds were issued by a state economic development authority. I had that wrong originally.

Here's a link to most of the documents. And here is the Bond Trust Indenture.

Including this paragraph from page 31 confirming freescooter's opinion of no jeopardy to the State:

The Bonds do not constitute a debt or liability of the State or of any agency or political
subdivision thereof, other than a special and limited obligation of the Authority, or a pledge of
the faith and credit of the State or any agency or political subdivision thereof, other than a special
and limited obligation of the Authority, but shall be payable solely from the funds pledged
therefor in accordance with this Bond Indenture. The issuance of the Bonds under the provisions
of the Act does not directly, indirectly or contingently obligate the State or any agency or
political subdivision thereof to levy any form of taxation for the payment thereof or to make any
appropriation for their payment, and the Bonds and the interest payable thereon do not now and
shall never constitute a debt of the State or any agency or political subdivision thereof within the
meaning of the Constitution or the statutes of the State and do not now and shall never constitute
a charge against the credit or taxing power of the State or any agency or political subdivision
thereof. The State shall not in any event be liable for the payment of the principal of or interest
on the Bonds or for the performance of any pledge, obligation or agreement of any kind
whatsoever which may be undertaken by the Authority. No breach by the Authority of any such
pledge, mortgage, obligation or agreement may impose any liability, pecuniary or otherwise,
upon the State or any charge upon its general credit or against its taxing power.​
 
CardinalZen said:
This is exactly correct. The Louisville Arena Authority is actually setup as a now profit, non stock corporation and the bonds were issued by a state economic development authority. I had that wrong originally.

Here's a link to most of the documents. And here is the Bond Trust Indenture.

Including this paragraph from page 31 confirming freescooter's opinion of no jeopardy to the State:

The Bonds do not constitute a debt or liability of the State or of any agency or political
subdivision thereof, other than a special and limited obligation of the Authority, or a pledge of
the faith and credit of the State or any agency or political subdivision thereof, other than a special
and limited obligation of the Authority, but shall be payable solely from the funds pledged
therefor in accordance with this Bond Indenture. The issuance of the Bonds under the provisions
of the Act does not directly, indirectly or contingently obligate the State or any agency or
political subdivision thereof to levy any form of taxation for the payment thereof or to make any
appropriation for their payment, and the Bonds and the interest payable thereon do not now and
shall never constitute a debt of the State or any agency or political subdivision thereof within the
meaning of the Constitution or the statutes of the State and do not now and shall never constitute
a charge against the credit or taxing power of the State or any agency or political subdivision
thereof. The State shall not in any event be liable for the payment of the principal of or interest
on the Bonds or for the performance of any pledge, obligation or agreement of any kind
whatsoever which may be undertaken by the Authority. No breach by the Authority of any such
pledge, mortgage, obligation or agreement may impose any liability, pecuniary or otherwise,
upon the State or any charge upon its general credit or against its taxing power.​
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Who bought the bonds?

They may be interested in that special provision for UL.
 
I have no clue really. Goldman Sachs was the lead underwriter, and I know some were placed through the local Hillard-Lyons Brokerage. But that's the extent of my knowledge about any of that.
 
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right. having the State Development Authority issue the bonds on behalf of the Arena Authority is also pretty standard procedure. State laws vary as to how it works, but typically these smaller authorities aren't necessarily set up to actually issue the bonds themselves. But as I said, while the state and the City won't get dinged directly, these kind of things have impacts on other projects. I've had to create extra reserve accounts because of something that happened in Texas, for example, and it increased our costs. We just happened to be doing a similar deal in Connecticut. Basically it makes it more costly for everyone, but if I were say Lexington, I would not want to be trying to finance a Civic Center next year.
 
freescooter said:
right. having the State Development Authority issue the bonds on behalf of the Arena Authority is also pretty standard procedure. State laws vary as to how it works, but typically these smaller authorities aren't necessarily set up to actually issue the bonds themselves. But as I said, while the state and the City won't get dinged directly, these kind of things have impacts on other projects. I've had to create extra reserve accounts because of something that happened in Texas, for example, and it increased our costs. We just happened to be doing a similar deal in Connecticut. Basically it makes it more costly for everyone, but if I were say Lexington, I would not want to be trying to finance a Civic Center next year.
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Funny you should mention that. Lexington was trying to arrange a similar placement to finance a renovation of Rupp Arena for UK. It was also in the $300 Million plus range, IIRC. The Legislature didn't move on it in the just completed session because the UK President is marshaling his forces for major campus upgrades/expansion and is keeping his powder dry for now.

UofL fans are understandably upset that issues with the Louisville arena deal might make it less likely for a similar improvement for UK.
:cool:
 
CardinalZen said:
Funny you should mention that. Lexington was trying to arrange a similar placement to finance a renovation of Rupp Arena for UK. It was also in the $300 Million plus range, IIRC. The Legislature didn't move on it in the just completed session because the UK President is marshaling his forces for major campus upgrades/expansion and is keeping his powder dry for now.

UofL fans are understandably upset that issues with the Louisville arena deal might make it less likely for a similar improvement for UK.
:cool:
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I see that the SEC is involved. They are VERY thorough in their investigations of this kind of stuff. If anyone in the UL Athletic office (specifically Tom Jurich your AD) had ANY kind of knowledge that the bonds couldn't be paid back because of insufficient revenue then he may have earned himself a ticket to jail. This isn't good for your school...no matter what conference you are in!
 
CardinalZen said:
I have no clue really. Goldman Sachs was the lead underwriter, and I know some were placed through the local Hillard-Lyons Brokerage. But that's the extent of my knowledge about any of that.
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Ah, Goldman Sachs, the leader in transparency and compliance. I was going to tell you to go back to your own board, but you have me here.

EDIT: UL had better hire at least 8 law firms for discovery.
 
FDNY99 said:
I see that the SEC is involved. They are VERY thorough in their investigations of this kind of stuff. If anyone in the UL Athletic office (specifically Tom Jurich your AD) had ANY kind of knowledge that the bonds couldn't be paid back because of insufficient revenue then he may have earned himself a ticket to jail. This isn't good for your school...no matter what conference you are in!
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I guess it's possible that the SEC is involved, but the source linked by the OP isn't know to be very reliable. I'm not sure why the SEC would be involved already before there was an official default. Anything is possible, I reckon.
 
Stinger92860 said:
Ah, Goldman Sachs, the leader in transparency and compliance. I was going to tell you to go back to your own board, but you have me here.

EDIT: UL had better hire at least 8 law firms for discovery.
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If UofL is smart, and I trust that they are, then they already have everything of interest already collected for instant accessibility in the case of a discovery order.

Interestingly, UofL did make some income concessions to the Arena Authority last year. Maybe they were just being nice, or perhaps a simple demonstration of good faith on the part of the primary tenant?
 
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CardinalZen said:
If UofL is smart, and I trust that they are, then they already have everything of interest already collected for instant accessibility in the case of a discovery order.

Interestingly, UofL did make some income concessions to the Arena Authority last year. Maybe they were just being nice, or perhaps a simple demonstration of good faith on the part of the primary tenant?
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It's called duty to preserve. Spoliation can be a b it ch
 
CardinalZen said:
I guess it's possible that the SEC is involved, but the source linked by the OP isn't know to be very reliable. I'm not sure why the SEC would be involved already before there was an official default. Anything is possible, I reckon.
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If they aren't...they will be...and they will find what they are looking for. truth is...the bond holders are the ones who will be screwed on this whole deal...a true modern day Boiler Room Southern version. This has the makings of a really good movie!
 
FDNY99 said:
If they aren't...they will be...and they will find what they are looking for. truth is...the bond holders are the ones who will be screwed on this whole deal...a true modern day Boiler Room Southern version. This has the makings of a really good movie!
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Jurich is played by Giovanni Rabisi and Swofford is the sucker who put up his family's savings and hustled.
 
I have no knowledge of whether there's anything shady going on or not. But I have been asked to sign similar agreements before receiving severance packages from previous employers. These types of things seem pretty standard.
 
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CardinalZen said:
I have no knowledge of whether there's anything shady going on or not. But I have been asked to sign similar agreements before receiving severance packages from previous employers. These types of things seem pretty standard.
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2x salary from private contributions for a "public" employee is hush money.

University counsel Angela Koshewa is on a three-month leave of absence before she officially retires June 1. Documents obtained under the Kentucky Open Records Act show the university is paying Koshewa — who has questioned some expenditures and proposals backed by President James Ramsey and Dr. David Dunn, the executive vice president for Health Affairs — twice her final salary.
...
The money is coming from private contributions to the university that can be used for any purpose, including to advance its academic mission, according to budget director Susan Howarth.
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Skiblets said:
That's pretty standard wording for severance packages. Also not too alarmed that higher ups got longer deals, that also is pretty standard. Kind of tough to link this to the house of cards that is the Yum Center. That shiite is shadier than Schiano, or Pitino or Petrino or Calipari
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Not in the public sector.
 
Those signed agreements will mean snow if the SEC gets involved in this due to the bond sale. This will get uglier and uglier as time goes on.
 
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