Moody’s Upgrade Buoys Vegas Convention Deal
The Las Vegas Convention and Visitors Authority can tout a higher rating when it sells $500 million of revenue bonds next week.
Moody’s Investors Service on Aug. 28 upgraded the authority’s revenue bonds to Aa3 from A1 while assigning the Aa3 rating to the $500 million negotiated deal expected Sept. 13.
“The upgrade to Aa3 primarily reflects LVCVA’s entrenched position as the nation’s market leader for large-scale conventions and the area’s substantial tourism amenities that include the renowned Las Vegas Strip,” according to Moody’s analyst Patrick Liberatore.
Moody’s, separately, maintains its Aa1 rating on $801 million of
the authority’s double-barreled general obligation limited tax revenue bonds issued through Clark County, of which Las Vegas is the seat.
Bond proceeds from this month’s deal will help fund the authority’s $860 million Phase Two expansion project that will add 1.4 million square feet to Las Vegas Convention Center — the country’s busiest. The expansion is slated for 2021. A Phase Three is also planned.
RBC Capital Markets is lead manager. JNA Consulting Group, LLC and Montague DeRose are co-financial advisors. Stradling is bond counsel.
“Southern Nevada’s economy is driven by tourism and this expansion will propel our convention center forward to enable us to maintain our status as the number one trade show destination in North America,” Rossi Ralenkotter, LVCVA chief executive officer, said in April when architectural drawings were released.
The Authority’s revenue bonds are all secured by a first lien pledge of net revenues from hotel room taxes collected throughout Clark County as well as revenues from its convention facilities after the payment of operating expenses.
The new deal is also secured by the authority’s expansion pledged revenues, an incremental hotel tax legally dedicated to expanding the Las Vegas Convention Center.
“Increasing hotel room rates are bolstering pledged tax receipts at a modest pace and to new all-time highs, and average daily hotel occupancy has been uncommonly strong at 89%,” Liberatore said. “Sound maximum annual debt service coverage of 3.0 times fiscal 2017 pledged revenues provides headroom to endure economic volatility. Recent economic growth in the US and globally directly benefits the authority’s revenues.”
Visit volume declined modestly in 2017, but remained in the 42 million range, after reaching all-time highs for each of the past few years, according to Moody’s.
The authority is an independent governmental entity with its own governing board and administrative staff.
S&P Global Ratings affirmed its A-plus underlying rating on the authority’s outstanding revenue bonds ahead of the new deal. Both rating agencies assign stable outlooks.
Proceeds of the 2018B bonds will finance construction of the convention center project, fund capitalized interest through 2020, and pay the costs of issuance. ◽
A rendering of the Las Vegas Convention Center expansion project. A $500 million revenue bond deal will help fund the improvements.