City of Memphis Delays Vote on Baseball Stadium Bailout
Earlier this month, Memphis Mayor W.C Wharton asked the Memphis City Council "to delay its vote once again on the purchase of AutoZone Park by the city" until a scheduled January 7th meeting.
Memphis television station WREG reported on December 11, following a contentious City Council meeting, that Wharton said the delay "allows additional time to analyze again every part of the proposed agreement, including all financial figures, and to continue negotiations to determine if it is possible to reach agreement with Fundamental Advisors within the context of the Council resolution regarding price and capital investment."
In 2000, a group of local business leaders organized a non profit corporation, the Memphis Redbirds Baseball Foundation, and borrowed $72 million in the bond markets to obtain the franchise for the expansion Memphis Redbirds, the Triple A affiliate of the St. Louis Cardinals in the Pacific Coast League, and build the stunning new AutoZone Park to house the team. In 2010, the foundation defaulted on the bonds and Fundamental Advisors, a Wall Street firm, purchased the defaulted bonds for a heavily discounted $24 million.
The original bondholders suffered huge losses. Fundamental Advisors is trying to make a profit on the deal by selling the team to the St. Louis Cardinals and getting the heavily indebted city of Memphis to buy the park for $15 million with yet another city of Memphis municipal bond offering.
Financial realities and public opposition could delay the proposed deal indefinitely. According to the state of Tennessee, the city of Memphis does not enjoy sound financial health even before undertaking a problematic additional $15 million in debt to purchase the financially troubled stadium.
The Memphis Daily News reported in November that Tennessee Comptroller Justin Wilson "[e]arlier this year. . . threatened to withhold approval of a city bond restructuring unless the city took immediate steps including using its reserves to restore several accounts within city government that had money advanced from them to other initiatives. At the time, Wilson also said the unfunded pension liability was another concern he had about city finances."
Despite the stadium's precarious financial situation, Forbes Magazine recently ranked the Memphis Redbirds as one of minor league baseball's most valuable franchises, worth $29 million. The St. Louis Cardinals announced in November they were purchasing the Memphis Redbirds baseball team for an undisclosed amount, but had no interest in purchasing the stadium in which the team plays.
If the Memphis City Council refuses to approve the plan to issue $15 million in bonds to purchase AutoZone Park when it meets on January 7th, the St. Louis Cardinals are expected to withdraw their offer to purchase the Memphis Redbirds.
If the stadium purchase plan is approved, and the sale price of the team is equal to the Forbes valuation, Fundamental Advisors could make as much as a $20 million profit on its $24 million purchase of the defaulted Memphis Redbirds Baseball Foundation bonds.
Breitbart Sports asked Fundamental Advisors for comment on this story but received no response.