Bonds for Minor League Ballpark Ready for Market

WORCESTER — When Charles Steinberg, president of the Pawtucket Red Sox, took the stage at Mechanics Hall recently for a chamber of commerce event, it was, ostensibly, to make introductions.

But as Dr. Steinberg, a dentist by training, plugged the minor league baseball team's plan to relocate to Worcester, he took a moment to mention something else: the pending sale of municipal bonds to help finance construction of a new ballpark for the team.

"We invite you, if that's your area of interest, to invest in Worcester," he said.

That day is coming soon. The city of Worcester is planning to price a taxable bond offering on Oct. 31, according to Thomas F. Zidelis, the city's chief financial officer. Although some details about the offering are still preliminary, the city is seeking to raise about $30 million from the sale.

The offering is expected to be the first in a series of bond sales that will raise the $100 million that Worcester estimates it will spend to build a new home in the Canal District for the Triple-A affiliate of the Boston Red Sox.

The ballpark is planned as part of a larger effort to redevelop vacant former industrial parcels with hotels, apartments and retail, while also modernizing the Kelley Square intersection near Interstate 290. Private and state investments will likely push the total project cost more than $200 million.

It's not often that individual investors seek out specific bond purchases, said Gary H. Sherr, senior vice president of Carl P. Sherr & Co. LLC, a Worcester financial advisory firm. He once had a client on Martha's Vineyard who wanted to invest in Martha's Vineyard municipal bonds, he said.

"In the old days, I did have clients who were very specific on a particular investment they were looking for," said Mr. Sherr. "These days, advisers like myself will identify an asset allocation" and find appropriate investments for clients.

It's more typical that individual investors are focused on the quality of municipal bonds, according to Thomas J. Bartholomew, chairman and president of Worcester-based Bartholomew & Co. Inc., an investment advisory firm.

"It's all about making money," Mr. Bartholomew said. "Nobody is willing to take a lower return to buy something because they feel good about the project."

According to a preliminary bond offering statement dated Oct. 25, Worcester's offering will consist of taxable bonds offered in $5,000 increments. UBS Financial Services Inc. and the city will, under a negotiated agreement, determine the price of the general obligation bonds and the interest rate the city will pay to the bond holders.

UBS will market the bonds, which will mature at different points over the next 30 years. Investors will receive interest payments twice a year.

All three of the major credit ratings agencies issued positive ratings on the offering last week. Moody's Investors Service gave the bonds a rating of Aa3, S&P Global Ratings issued an AA- rating and Fitch Ratings issued an AA rating.

Ratings agencies, which typically get paid by bond issuers, use different scales to rate bonds. Ratings can depend on factors such as existing debt loads, municipal expenses and the ability to repay loans.

"In our opinion, the project introduces a modest level of financial risk and budgetary challenges should the city face revenue shortfalls requiring general fund and tax levy support in order to make timely debt service payments," S&P wrote in its report.

One factor that may benefit the Worcester offering: a relative shortage of new muni bond issues in 2018. National tax cut legislation in 2017 eliminated a type of bond offering that governments and nonprofits used to refinance tax-exempt debt, impacting the number of bond issues this year.

Mr. Zidelis, the city's CFO, said he expects the Worcester offering will attract interest from individuals.

"I truly believe you'll see some local investors investing in these bonds," he said.

On Monday, the Worcester Regional Chamber of Commerce sent a notice to members informing them of an "opportunity to invest in the Worcester Red Sox" by purchasing the bonds.

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