Cleveland Stadium COP Deal Receives BBB-Plus From S&P

CHICAGO - Standard & Poor's yesterday rated Cleveland's upcoming $130 million certificates of participation issue for a new football stadium BBB- plus, despite the deal's reliance on annual budgetary appropriations.

Proceeds from the issue will be used to build a $240 million stadium for the Cleveland Browns expansion team. The stadium's high profile, voter support, and pledged contributions from the National Football League and Ohio give the issue underlying strength, said Standard & Poor's director Joseph O'Keefe.

"You can conceive of a number of scenarios that might affect the willingness to appropriate the money, but the importance of the project (alleviates) that concern," he said.

Though the COPs depend on annual appropriations by the City Council, the city has designated several revenue sources for debt service payments, including an 8% city parking tax, a $2 increase in rental car rates, and a 2% increase in the city's admissions tax.

The COPs will also receive backing from a 10-year extension of Cuyahoga County's alcohol and tobacco taxes approved by voters in 1995. Those tax revenues are currently being used to pay off debt issued by the Gateway Economic Development Corp. When that debt matures in 2005, the tax revenues will be used to pay off the COPs until 2015.

Earlier this month, Moody's Investors Service rated the COPs Baa1. Fitch Investors Service is not expected to rate the issue. Standard & Poor's yesterday also affirmed its A rating on the city's general obligation debt, which Moody's rates A2 and Fitch rates A-minus.

The issue will be coming to market early next month. A.G. Edwards & Sons Inc. has been named senior manager.