Quote:
Originally Posted by Tinordi
Maybe you could explain this further because I don't see it that way.
What costs/risks are CSE bearing in this case?
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The Flames borrow $250M upfront for construction.
The organization then is responsible for placing a surcharge on tickets that will support an annual revenue stream to pay back the loan. The risk is that demand for tickets drops and CS&E is forced to lower prices, hurting their bottom line. The risk to the lender is that the teams fold and CS&E goes under.
Financing can be sourced commercially at a low rate because there is a steady dedicated income stream and the organization is well established with a good credit history.
The other alternative is that the City borrows on behalf of CS&E at the Alberta Capital Finance Authority rate and takes a spread on that to account for additional risk.
In either case, it is the Flames organization bearing that cost.