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Now comes the hard part

Complex financing is key to getting the ballpark built

By Beth Healy, Globe Staff, 7/27/2000

ow it's up to the bankers.

The politicians have signed off on a new Fenway Park, but the plans could collapse if the Red Sox fail to pull together a large and complex financing package to pay for the $352 million ballpark.

Financiers across Boston said it was too soon to predict how the loans might be structured. But people familiar with sports finance and the Red Sox said the biggest concern is that the team will end up financially strapped under its debt load.

It's widely believed that FleetBoston Financial Inc. - banker to the Red Sox and a specialist in sports lending - will lead the financing. Other participants in the deal could include John Hancock Financial Services, Citizens Bank, and other local institutions with an interest in backing the popular home team.

But this isn't a deal that Wall Street and the big New York banks will be clamoring to get a piece of, financial sources said. That's because it's likely to be a high-risk, low-return project.

''They're going to need help from a lot of sources in terms of structure and flexibility, payment terms,'' said RobertCaporale, chairman of Game Plan LLC, a Boston consulting firm that counts Fleet among its investors.

''They're going to have to use all of their goodwill and all of their financing capabilities,'' Caporale added.

Fleet's sports finance group oversees a $1 billion portfolio, including a $425 million line of credit to Major League Baseball. It is unlikely that Fleet would take on the entire Sox debt on its own, nor will the financing be handled as a single loan.

Financing for a park to replace 88-year-old Fenway could include several varieties of debt. There are likely to be construction loans, senior debt, and subordinated debt (subordinated is more risky because lenders are repaid only after more senior creditors are repaid). The debt will probably be staggered, sources said, to ease the burden of repaying it.

Loan terms will be based on cash flows expected by the Red Sox.

Property, franchise value, and broadcast rights will also be considered.

The team will probably also need to sign up takers for its $230,000 luxury boxes in advance of any financing.

Most large business loans are split up into pieces, or syndicated, to spread risk and bring other institutions into deals. A slice of the Red Sox debt could be split off for syndication, people familiar with the deal said.

But much of it will be too risky to offer up to top institutions that have no sentimental attachment to the team.

At Fleet and Hancock, top executives have strong personal interests in the Red Sox.

Fleet president Charles Gifford has been involved in deal talks with city and state politicians, as has Hancock chief executive David D'Alessandro. Fleet chief executive Terrence Murray is long believed to have had an eye on buying the team.

But all three have duties to the public shareholders of their companies. None wants to explain to Wall Street why they poured money into a loan with modest earnings instead of a higher-yielding vehicle. Certainly none wants to lose money on the deal.

Fleet declined to give details of possible financing plans. Spokesman Jim Mahoney said: ''We're going to be working diligently and privately with the Red Sox organization, in an effort to structure a financing package.''

Meanwhile, sources said the mayor and the governor are leaning on Fleet to make sure the new ballpark doesn't halt over private financing, now that public aid worth $312 million - city loans worth $212 million plus $100 million in state infrastructure investment - has finally been hammered out.

Governor Paul Cellucci told reporters yesterday: ''I think the combination of state and city financing is a pretty powerful incentive to the private sector to provide the private financing that's needed for the actual construction of the new Fenway Park.''

Meg Vaillancourt of the Globe Staff contributed to this report.

This story ran on page E01 of the Boston Globe on 7/27/2000.
© Copyright 2000 Globe Newspaper Company.


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