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Red Sox focus on financing

By Meg Vaillancourt, Globe Staff, 8/1/2000

ess than 48 hours after state lawmakers passed a bill authorizing public aid for the Red Sox's $665 million new Fenway Park project, team officials are now focused on their next big hurdle: finding more than $350 million to fund the team's portion of the project.

But while team officials argue that the legislation passed on Saturday presents the Sox with a difficult challenge, the Red Sox stressed yesterday that they are committed to trying to find the private financing they need to build the new ballpark.

"We are going to move as aggressively as we can to get that accomplished," Red Sox executive vice president James Healey said.

Team officials are preparing to meet with Boston Mayor Thomas M. Menino, city business leaders who support the ballpark project, and the team's bankers, FleetBoston Financial Corp. As the project moves forward, FleetBoston is expected to play the lead role in putting together a syndicate of local and national financial institutions to finance the project.

According to specialists in stadium financing, it likely will take the Red Sox and their bankers three to five months before they will be able to determine whether the project can be financed. Lenders will want to review every element of the team's plan, including the costs associated with the project and the team's estimates for how much new revenue a new ballpark will generate over the 20- to 30-year term of the loan.

Financiers, for example, will have to test the accuracy of the team's revenue estimate for naming rights, in-stadium marketing opportunities, the projected long-term growth in broadcast revenues, and future payroll costs. Lenders also will review the team's assumptions on the number of seats planned for the new facility, the team's proposed ticket prices, and the Red Sox's contingency plans if there is a baseball strike sometime in the next two to three decades.

"There are still a lot of questions left unanswered and a lot of assumptions to test," said one business source. "If it takes 30 to 60 days to go through all the steps you need to buy a $250,000 house, it will take a little longer for a $665 million stadium project."

While FleetBoston oversees a $1 billion sports portfolio, including a $425 million line of credit to Major League Baseball, and FleetBoston chairman Terrence Murray is said to be interested in buying the team someday, few expect the bank to be the Red Sox's only lender. The team's stadium loan is likely to be sliced into pieces, or syndicated, to spread the risk among several different financial institutions.

Possible local participants include John Hancock Financial Services Inc., Sovereign Bank, Citizens Bank, and Fidelity Investments. Some financial analysts suggest that lenders in other states that have secured loans for their hometown baseball teams also may be asked to invest in the Red Sox project.

The Red Sox have frequently noted that in part due to the expensive site, the new ballpark will require the team to make the largest investment in a new stadium in the history of modern sports. As a result, FleetBoston and other lenders will also want to test the team's assumptions on site and cleanup costs, and possible design changes that might be used to shave tens of millions of dollars from the stadium's price tag.

The legislation passed on Beacon Hill requires the team to fund cost overruns on site acquisition and cleanup beyond the city's $140 million cap. That means the Red Sox will be liable if delays result in escalating land costs or if the site proves more contaminated than the team anticipated.

To build the new ballpark, the city will need to seize roughly 10 acres of privately owned land in the Fenway adjacent to the current 88-year-old facility. The bill adopted by lawmakers Saturday clearly states that the new Fenway Park project serves a "public purpose," a legal standard required to take the land by eminent domain. Landowners have threatened to sue to block the takings, and opponents cheered when the Sox lost their bid to amend the state legislation to include the phrase eminent domain. The city's attorneys have said they are confident the city can seize the land.

Any land takings must be approved by a two-thirds vote by the Boston City Council. A majority of councilors have said they will vote against the deal. However, Menino notes that there are a number of details that still need to be ironed out with the team. While councilors can call hearings on the project, the mayor is unlikely to place a specific bill in front of them until the team lines up its private financing, City Hall sources said.

"The Red Sox astounded everyone by getting their bill through so quickly when other teams have spent years trying," said one State House source. "But now the challenge is the private financing. And since it will take several months to figure that out most of the other hurdles. . .are just a sideshow."

This story ran on page F01 of the Boston Globe on 8/1/2000.
© Copyright 2000 Globe Newspaper Company.

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