Fitch Rates USTA National Tennis Center Variable-Rate Taxable Bonds 'A'

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned an 'A' rating to the USTA National Tennis Center (NTC) variable-rate taxable bonds, series 2009. Fitch also affirms the 'A' rating on approximately $109 million tax-exempt civic facility revenue bonds issued through the New York City Industrial Development Agency. The Rating Outlook is Stable.

The new $10 million borrowing will be variable-rate demand obligations, swapped to a fixed rate. The 2009 bonds will be backed by a direct-pay letter of credit (LOC). Fitch expects to assign liquidity ratings that incorporate the LOC support closer to the date of issuance.

The 'A' rating is based on the U.S. Open's position as a premier international tennis tournament - one of the four Grand Slam events - that has a history of strong fan attendance and revenue growth. The growth of the U.S. Open as an event and the NTC's popularity have occurred during local and national recessions, illustrating the resiliency of demand. The rating also incorporates the legal framework of the NTC as an operating entity of the United States Tennis Association (USTA). The financial strength of the NTC and affiliates as a consolidated entity is also a key credit strength. Fitch anticipates no additional borrowings in the near term. The average life of the NTC's debt is less than 10 years, and has a final maturity in 2023.

Credit risks include the discretionary nature of the sports and entertainment business, although Fitch acknowledges that ticket revenue for the 2009 tournament, held during the worst economic crisis in recent memory, increased 9.5% over the previous year. Renewal risks associated with the national broadcast contracts, luxury suites, and key sponsorship contracts are additional risks to the rating. Fitch views the USTA's proactive management team as a key mitigant to these risks as they have delivered positive renewals and extensions with their broadcast partners and continue to maintain strong sponsorship relationships as well as pursue new sponsorship partners and revenue generating opportunities. Additionally, the USTA's work and investment in grassroots programs as well as youth development initiatives to further the expansion of the sport are viewed positively as they aim to build and diversify the sport. The single-facility event risk of the NTC, the standalone, non-recourse status of the debt and the fairly narrow scope of pledged revenue are concerns, but are largely mitigated by the fact that the USTA has held the tournament for 126 years without interruption.

Pledged revenues consist of ticket revenues and broadcast revenues which are currently a 6.2 times (x) multiple of maximum annual debt service (MADS). Ticket revenues alone cover MADS at 4.5x. MADS including the 2009 series is estimated to be approximately $19.5 million and Fitch expects coverage to remain strong at or above historical levels. The USTA's proven fan base drives this economic profile, as paid attendance for the U.S. Open has increased approximately 3% annually in this decade, to approximately 700,000.

The bonds will fund NTC's near-term capital plan including concession facility improvements, office renovations and stadium upgrades. Created in 1978 as an operating entity of the USTA, NTC is a 501(c)(3) entity that operates and maintains the USTA Billie Jean King NTC, where the U.S. Open tournament is held, in Flushing Meadows, NY. NTC has the right to collect all U.S. Open ticket revenue for bondholders.

Additional information is available at 'www.fitchratings.com'.

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