DALLAS -- The St. Louis Regional Convention and Sports Complex Authority may sell up to $270 million of tax-exempt lease revenue bonds -- which could include a nonrated series -- in early August if a lawsuit challenging the project is resolved.
Robert Baer, chairman of the authority, said lawyers believe the chances are good that the Missouri Supreme Court will refuse to hear an appeal by critics challenging the long-awaited project.
The opponents are trying to stop the project because it was not approved by taxpayers. Led by the Rev. Larry Rice, an advocate for the homeless, they have lost in the lower court and on appeal.
"We think that it will be resolved," Mr. Baer said. "He's already lost at two lower courts."
The state supreme court could decide this week whether to hear the case. If it refuses, the challenge is finished. If the justices accept the case, issuance could be delayed indefinitely.
Meanwhile, project officials say the financing to expand the Cervantes Convention Center and build a 70,000-seat domed stadium will feature three series of lease revenue bonds -- possibly including a nonrated junk issue backed by the weak credit of the city of St. Louis.
"It's not a certainly yet," Mr. Baer said. "But it is the opinion of our financial advisers that a nonrated issue is best."
Project officials last week made two days of presentations to representatives of Fitch Investors Service, Moody's Investors Service, and Standard & Poor's Corp. Ratings for the triple-series issue could be known by early this week.
A group led by Smith Barney, Harris Upham & Co. tentatively plans to sell between $250 million to $270 million of bonds the week of Aug. 5.
William Darmstaedter, vice president and manager of public finance at Boatmen's National Bank of St. Louis, co-financial adviser on the project, said the three series of bonds will be paid with appropriations from the state of Missouri, St. Louis county, and the city.
The project's other financial adviser is Evensen Dodge Inc. of Minneapolis.
Under an agreement, the triple-A rated Missouri will pay for half the estimated $20 million in annual debt service costs, while St. Louis County and the city will each pay 25%.
Lease revenue bonds paid through annual appropriation, as these would be, generally are rated at least one notch below the backer's general obligation bond rating.
Because of that, Mr. Darmstaedter said the state series would likely be rated double-A; the county series a single-A; and the city rating could be below investment grade. St. Louis is now rated Baa by Moody's Investors Service and triple-B by Standard & Poor's.
"I don't know where we stand with the rating agencies right now," he said.
Project officials have studied the possibility of using credit enhancement for the city issue, but they said the 100 basis points cost was prohibitive. In fact, Mr. Darmstaedter said the authority would have a lower overall cost by paying a higher interest rate on an unrated issue rather than purchase credit support.
St. Louis's comptroller, Virvus Jones, had questioned the use of junk bonds for the city's series and insisted that the debt should be backed by a dedicated revenue stream.
Mr. Jones could not be reached for comment, but project officials said he has dropped his opposition after Mayor Vincent Schoemehl agreed to name a task force to study possible revenue streams for the project. The city could seek an election by November 1992 on new taxes to secure the debt payment with.
St. Louis County voters last year approved a hotel tax to be used to secure its $5 million share of the debt service. But recently, county officials reversed a long-standing position and agreed to back up its share with a pledge of other county funds in the event of a tax shortfall.
"The hotel tax barely generated enough. It needed $5 million and that's what it is expected to generate," said Mr. Darmstaedter. "That's a little difficult to sell securities under."
The funds will be used to expand the St. Louis convention center and will include construction of a domed stadium that local officials hope will be home to a new National Football League franchise.
The city lost its franchise when the Cardinals moved to Phoenix two years ago, but the facility could be completed by November 1995 for a new team. But Mr. Baer said the economics of the project are dependent on convention business and not on winning a professional football franchise.
"That is not what is driving this deal," he said.