Saturday, May 23, 2015

Star Glosses Over $106 Million Termination Payments Paid To Goldman Sachs To Refinance Stadium And Convention Center Debt

More than a week after Advance Indiana told you about the nearly $106 million in termination payments the Indiana Finance Authority is paying to Goldman Sachs in order to get out from under risky interest rate swap bonds that should have never been utilized to construct Lucas Oil Stadium and the expanded Indiana Convention Center, the Gannett-owned Indianapolis Star gets around to writing an obligatory short news story buried in its higher priority coverage of anything related to the Indianapolis 500 this holiday weekend. Naturally, the newspaper's writer finds a way to put lipstick on a pig.
The state is paying $71 million to investment bank Goldman Sachs to allow refinancing of risky debt on Lucas Oil Stadium — a move than one economics expert said might be prudent, but also underscores the risk of the original deal.
Dan Huge, chief financial officer of the Indiana Finance Authority, said the $71 million will be offset by more favorable, fixed terms for $296 million in debt on the stadium. The payment to Goldman is included in the new financing.
Lucas Oil Stadium opened in 2008 at a cost of $720 million, including at least $620 million from taxpayers.
Huge said the cost of the debt — principal and interest — on the refinanced bonds is “at almost the same level as it was prior to doing this refinancing and making the termination payment.”
The previous debt involved “interest rate swaps,” a type of financial derivative that has been widely criticized as an inappropriate gamble with public money.
Princeton economics professor Uwe Reinhardt said the situation “wasn’t a big disaster, but it could have been.”
“It means I got my (butt) in a sling and now I have to get out of it,” he said. “Sometimes you have to pay the arsonist to prevent a worse fire.”
A separate bond issue will be used in part to pay Goldman Sachs $34.7 million to exit an interest rate swap deal for the Indiana Convention Center.
Goldman Sachs spokesman Michael DuVally declined comment.
In 2012, a top Goldman Sachs executive who worked in derivatives resigned and wrote in The New York Times that the company had become “toxic and destructive” in its pursuit of making money . . .
Notice the unwillingness of The Star to address just who it was who was responsible for getting us into the interest rate swap mess. The newspaper doesn't even bother to add the two termination payments together to get the much higher dollar amount, leading with the much lower figure and throwing in the additional amount further down in the story. Why are the same lawyers and financial advisers allowed to continue to reap professional reward for their past colossal failures from their past, imprudent advice? God forbid we focus on anything bad that happened on former Gov. Mitch Daniels' watch. It's just a "prudent" move that means we now owe an additional $106 million on stadium and convention center debt, which in all likelihood will never be paid off before someone decides it's time to tear down the buildings and replace them with new ones.


Anonymous said...

The pathetic Indianapolis Star proves an unwillingness to address ANY actual news other than "happy happy" drivel like the Indy 500- which is barely a shadow of the excitement and world-wide acclaim it once enjoyed. Sad to say but, really, does anyone care about rent-a-civic-fraud Mark Miles' Indy 500 to the extent they did in the past?

And when it comes to the Goldman Sachs termination payments Advance Indiana so skillfully presents to the public, all the IndyStar can do is bury a small mention. Typical more of "People" magazine than journalism... (no intent to dishonor "People" mag).

Advance Indiana is the very first place I turn to every morning as I begin my day. Thanks again Gary for this important news about how Indy officials are using the termination payments to extricate themselves from poor funding devices. I only hope Marion County residents and voters (and City Councilors!!!) can comprehend exactly what you are exposing.

Pete Boggs said...

Is it true they're changing the name, to the Indy Hapless Scar?

Anonymous said...

Please review this...

New Community Hospital construction cost.... $235 million

New Eskenazi Hospital construction...$754 million

Other than Eskenzi having a jail facility and a heli pad, why the cost difference?