OREANDA-NEWS. On August 8, 2016, S&P Global Ratings assigned a preliminary issue rating of 'BBB-' on Brooklyn Arena Local Development Corp.'s proposed $459.945 million PILOT revenue refunding bonds Series 2016A due 2043 and the $20 million PILOT revenue refunding bonds Series 2016B (federally taxable) due 2041. The outlook is stable. The final rating will be issued following our review of final execution documents for the transaction and the final pricing on the bonds. At the same time, we are affirming our 'BBB-' rating on Brooklyn Arena Local Development Corp.'s. unrefunded PILOT revenue bonds series 2009 and revising our CreditWatch positive placement to outlook stable. We will withdraw the ratings on the refunded bonds and re-rate the pre-refunded bonds upon financial close.

Summary The project is a multipurpose arena in Brooklyn, N. Y., known as Barclays Center and home to the National Basketball Association's (NBA) Brooklyn Nets and the National Hockey League's (NHL) New York Islanders. The arena opened in October 2012, and July 2013 to June 2014 marked the first full year of operations. Arena revenues supporting the debt issued by Brooklyn Arena Local Development Corp. come from suite premiums, advertising, concessions, a share of ticket sales, and merchandise.

The proposed refunding results in substantial debt service savings of about $3.4 million, on average, over the debt term. However savings are front-loaded, averaging about $6.6 million annually within the first 10 years of the debt term followed by $1.6 million in average annual savings through 2044. Lower aggregate debt service costs improve coverage levels, providing the project with an additional cushion at the current rating level. Our 'BBB-' rating reflects mostly stabilized events and basketball revenue, but continued uncertainty regarding the ramp-up for the Islanders after their first season at the arena, and the potential risk associated with Islanders relocation or contract modification within the next several years. The outlook is stable.

The stable outlook reflects a reasonable forecast as the arena concluded its fourth year of operations.