After the 100th Indy 500 will speedway be sold? (Update)

UPDATE [Editor's Note: The improvements to the facility will be nice – kinda like someone who repaints a house and does some remodeling for curb appeal prior to putting the house on the market for sale. They are spending $40 million of the $100 million. Will be interesting to see whether some of the remaining $60 million will be used to light the facility so the final race of the IndyCar season could be the Indy 400 under the lights. It would be spectacular.]

The Indiana media's coverage of the mechanics of the $100 million public subsidy for improvements to the Indianapolis Motor Speedway has been less than informative. A press release this week from Fitch Ratings announcing an AA+ rating for the bonds provides more information than previous news reports have offered about the deal. Along with issuing its second-highest rating to the IMS bonds, the credit rating agency also reaffirmed the state's AAA bond rating.

The bonds are described as "limited obligations" of the Indiana Finance Authority ("IFA"), which are paid from biennial appropriations made to the legislatively-created Indiana Motorsports Commission ("IMC"). The high bond rating assigned to the IMS bonds is instructive. It's based entirely on the state's current financial and debt situation and has nothing to do with the continued economic vitality of the Indianapolis Motor Speedway ("IMS") as a going concern.

According to Fitch, IMS will lease to IFA any part of its facilities on which improvements are being made with the $96 million derived from the bond proceeds. IFA will, in turn, lease the facilities to the IMC, the state entity responsible for carrying out the improvements to the IMS, which will then lease the facilities back to the IMS. The IFA and IMC have covenanted to obtain state appropriations of $7 million annually to repay the bonds, which will have a 20-year maturity cost of $140 million.

Fitch's rating is unaffected by the fact that the proceeds of the bonds are being used for a privately-owned facility. "IFA has strong incentive to seek appropriations for this project given the demonstrated state commitment," Fitch says. "In three consecutive legislative sessions the general assembly approved legislation for this transaction. Each of the legislated changes enhanced protections for bondholders and deepened the state's commitment to the project." Fitch notes the currently biennial budget includes a $14 million appropriation to cover debt service on the bonds.

IMS has pledged to pay $2 million annually to IMC to cover the $40 million difference between the amount the $100 million authorized by the legislature and the $140 million needed to cover the 20-year bond obligation. The state will also credit the IMS for taxes and fees collected from the special taxing district it has created to encompass the speedway and surrounding areas. After 30 years, the IMS pledges to guarantee any shortfall in the difference between the $140 million and the annual $2 million in payments it made to the IMC, plus a credit for taxes and fees paid into the special taxing district. It's interesting that the bonds have to be paid off in 20 years, but a determination of a shortfall between revenues generated from within the special taxing district and the $140 million won't be made until a decade later. Advance Indiana

05/26/15 Something is going on behind the scenes. Watching the pre race broadcast for the Coke 600 and the announcers actually mentioned IndyCar, which as of two months ago was strictly verboten. Keep your ear to the ground…something is happening.

And Michael Knight writes, New and previously not available corporate signage is now most apparent at the Indy Speedway. The infield lot where, for decades, the media parked has become a site for corporate display tents. The media parking was moved outside the track, on Georgetown Ave. (where the media was gridlocked in for hours after the race). Prices are up: I spoke with several suites holders who were outright angry at the steep price increases for food and beverage service. Sure, sometimes things are said in the heat of the moment, but a friend of mine who coordinates services for a number of suite holders told me the talk is they plan to put up with this through next year's 100th race and then not renew.

What I felt was every dollar that could be, or can be, squeezed out of the existing IMS assets was and is the absolute highest priority for Hulman & Co. CEO Mark Miles, IMS President Doug Boles, and staff. The impression left is that the Hulman/IMS business must have been in much worse financial shape than imaged by any outsider, and Miles' mandate from the Board of Directors is to clean-up the books and bolster the bottom line. Not that I have any direct knowledge of that this is in the works, but it's a business fact that sometimes the kinds of things Miles is doing are done in preparation for a sale, to make the enterprise much more attractive to potential buyers.