April 20, 2024

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High-yield investors are in for a treat with Suffolk Regional OTB bond deal

3 min read
High-yield investors are in for a treat with Suffolk Regional OTB bond deal

Municipal bond buyers hungry for high-yield paper will get to feast on a deal coming to market this week from a New York issuer.

The Suffolk Regional Off-Track Betting Corp. in New York will issue $349.02 million of Series 2024 tax-exempt revenue bonds.

KeyBanc Capital Markets is expected to price the deal on Tuesday. Munistat is the financial advisor and Harris Beach is the bond counsel. The issue is tentatively structured as term bonds maturing in 2034, 2044 and 2053.

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The high-yield deal is unrated and will price into a market that is red hot at the moment.

For the past few months, investors have been buying up deals and going into funds that feature higher-yielding paper.

In the latest reporting period, high-yield muni mutual funds saw a 10th straight week of inflows — $278.6 million — following a $435.9 million inflow in the previous period, according to LSEG Lipper.

SROTB is a public benefit corporation that was established in 1974 and operates under the supervision of the New York State Gaming Commission. It has two main lines of business which include an off-track wagering business on thoroughbred and harness racing and a video lottery gaming entertainment and hospitality business.

Its operations are anchored by its flagship property, Jake’s 58 Casino Hotel.

In 2011, SROTB filed for bankruptcy under Chapter 9. At the time, its managers cited local economic problems and a lessening interest in horse racing as causes for its financial woes.

In 2013, it was granted a license to conduct video lottery terminal operations and opened a VLT gaming facility at Jake’s 58 in 2017, leased from and operated by Delaware North. In 2020, SROTB emerged from bankruptcy.

In 2021, SROTB bought out Delaware North, the former manager of Jake’s 58, which has since achieved record performance.

Phillip Boyle, SROTB’s CEO, spent 26 years in the New York State Legislature, including 10 years as a state senator. He backed the 2013 legislation that provided SROTB with its license.

Michael Bonakdar, the general manager, has more than 40 years of gaming experience. He was previously the GM/CEO at North Star Casino Resort in Wisconsin and has worked at Caesars Palace Hotel Casino, Epic Gaming, and MGM Grand Hotel Casino in Las Vegas.

Jake’s 58 currently has 1,000 VLTs and offers electronic table games including blackjack, craps, baccarat, roulette and three-card poker, according to an investor presentation.

It also has a separate OTB room with HDTV screens and racebook wagering machines for simulcasts on horse racing. Jake’s has a full-service restaurant, three bars and a quick-serve cafe. Its 200-room hotel has a concierge lounge, which can accommodate corporate meetings.

Proceeds of this week’s sale will be used to finance the renovation and expansion of Jake’s 58 to add 1,000 video lottery games in the casino as well as to renovate all hotel rooms, including expanding the concierge lounge and converting standard rooms on the top floor into 16 luxury suites and to renovate the Bistro 58 into a sports bar/grill and add parking.

A 13,000-square-foot multi-use convention and events center is planned with an expected capacity of 200 for a seated event and up to 400 for standing room only concerts.

Proceeds will also be used to refinance a 2021 credit agreement and provide for a debt service reserve fund.

The bonds are revenue obligations secured by a first priority lien and security interest in the pledged revenues and additionally secured as a general obligation of the issuer that will be payable and secured by the assets of the issuer. The issuer has no taxing power.