Convention centers face risk as delta increases threat to crowds |
Tribune press service
Delta tension is wreaking havoc on the fragile recovery of the convention industry.
Some large gatherings are closed as the number of coronavirus cases rises again, dealing a further blow to a business that was already struggling to recover from the era of social distancing and working from home. The New York International Auto Show was canceled this month for the second year in a row due to concerns over the pandemic. In Florida, the epicenter of the outbreak in the United States, the North American Association of Food Equipment Manufacturers and the Global Surgical Conference have canceled their events, the latter’s organizers citing the “dramatic surge” in state cases.
“It’s very difficult to bring a group of people together and make sure they’re all comfortable meeting,” Safina Ali, credit analyst at S&P Global Ratings, said in an interview. “To some extent, they might not even return to pre-Covid levels,” she said, referring to convention centers.
Bond-funded convention centers have seen their operations dry up since the pandemic hit the United States in early 2020. The Center for Exhibition and Industry Research reported that the industry has shrunk to $ 24 billion. dollars, down $ 77 billion from 2019.
“There won’t be a switch and anyone can go back and attend events,” said Brad Mayne, president and CEO of the International Association of Venue Managers.
Still, there isn’t much distress right now for convention center debt, said Eric Kazatsky, senior U.S. municipal strategist at Bloomberg Intelligence. Many of them had fairly strong cash flow before the pandemic and decent credit quality.
“They had money to spend,” Kazatsky said. “Things are not at zero. They just refused. There are still conventions being held.
Additionally, the municipal market is looking for supply amid continued investor demand, and there is an appetite for new projects, he said.
About $ 1.5 billion in municipal bonds for convention centers have been sold so far this year, up from $ 2.4 billion during the same period in 2020, according to data compiled by Bloomberg. Some upcoming municipal bond deals could offer some insight into how investors view risk.
The City of Abilene, Texas, through the Abilene Convention Center Hotel Development Corp., is seeking funding for the construction of a full-service, upscale, 200-room hotel and conference center in 241 kilometers west of Dallas-Fort Worth Region. S&P considers the $ 19.5 million BBB- senior bonds a cut above the junk. In addition, the company is also selling $ 24.7 million of senior bonds for the project.
Also in Texas, the Baytown Municipal Development District outside of Houston plans to sell about $ 61 million in bonds to fund the development of the Baytown Convention Center Hotel with about 208 rooms, according to the bond documents.
Yet these agreements may belittle the risks posed by the industry downturn. Earlier this week, S&P said it expected Overland Park Development Corp. in Overland Park, Kansas, is drawing on debt service reserves of $ 530,000 to cover part of its interest payment on September 1.
“If revenues do not improve significantly over the remainder of 2021, especially given the additional uncertainty imposed by the delta variant, credit quality could deteriorate,” S&P said in the report on Tuesday. Overland debt.
Cooper Howard, director of fixed income strategy at the Schwab Center for Financial Research, said the impact of the pandemic on convention centers is “looking at the liquidity and health of the region in which they are located. . “Right now the Delta variant doesn’t appear to pose a major risk to this industry, in the longer term it’s something that yes we will be watching,” Howard said.