Question

1. What financial market might a project sponsor go to, to secure funding for a new basketball stadium in Los Angeles that could cost up to $3 billion dollars? Be specific in your response with an in-depth explanation.

Answer 1

To secure funding for a new basketball stadium in Los Angeles that could cost up to $3 billion dollars the project sponsor can go to the “bond market”. In this case the stadium can issue revenue bonds in which payments of the principal and the interest on the bonds will be tied to a particular revenue stream that will be generated by the stadium in future after it is complete.

Another financial market that can be used here as an alternate option is the traditional financial market which will involve a sale-leaseback plan. In this case the project sponsor will build the stadium and sell it to a state or political sub-division. A long-term stadium lease will be included by the professional sports team involved here. Even revenue from long term lease of luxury boxes/seats can be used here.