Yankees Curve Ball Strikes Out Centerplate
Centerplate Inc. (CVP-AMEX) competes in one of the most competitive business around, providing concessions, catering and merchandise for sports facilities and convention centers. If you have noshed on the SellSide’s dime, you have probably funneled some money their way, given they have worked 24 World Series Games and 10 Super Bowls.
But their crown jewel was their contract for Yankee Stadium, which will not be renewed with the Yankees moving into the new digs in 2009:
Centerplate, Inc. was informed today by the New York Yankees that it will not be the concessionaire for the new Yankee Stadium set to open in 2009. This does not affect Centerplate’s current contract covering the existing Yankee Stadium, which runs through December 31, 2008. Thus, this decision by the Yankees is not expected to affect the Company’s 2008 financial results. However, if Centerplate does not obtain new business to offset the impact of not having a contract to service the new Yankee Stadium in 2009, this loss will have a material adverse effect on the Company’s Adjusted EBITDA beginning in 2009. PRN Newswire
Centerplate is structured as an income vehicle; its IPO in 2003 was the first offering of Income Deposit Securities (IDSs), the first such offering of any such securities.
Centerplate’s decline will whack its shareholder base of income seeking investors, and is the latest example of a debacle in the brave new world of alphabet soup. Who ever heard of IDSs? The company’s woes are being exacerbate by the credit crisis:
After the market closed Tuesday, the company said it will pay 13 cents per income deposit security on April 21 to holders of record on April 10. Each income deposit security issued by the company is comprised by one share of stock and a subordinated note.
Centerplate will be able to pay the dividends since it obtained an amendment to its credit facility that will allow it to make payments in April and May. The amendment also allows the company to invest in a potential new service contract and increases its ability to make capital expenditures in 2008, Centerplate said.
But without another amendment, Centerplate won’t be able to keep paying monthly dividends beginning in June, and may need to defer interest on its subordinated notes. Centerplate blamed the tightening credit markets, saying it has been difficult to get amendments “on favorable terms if at all.”
The company also said it may be “more prudent” to change its dividend policy and preserve capital to reinvest in the business. AP
My sources n the Bronx are indicating the Yankees will be taking their concessions in-house, and god only knows how much a beer will cost by the time the cost overruns for the new stadium are factored in.
The old Yankee Stadium was the House that Ruth built, but the new one is likely the House that Only Hedge Fund Moguls can afford to visit.
New Stadium Under Construction with Sinatra Soundtrack
Centerplate Announces No Role in New Yankee Stadium
PRN Newswire
Centerplate Drops on Threat to Dividend
AP
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