Rupp complex lays off 53; needs Lexington’s help on debt for $275 million expansion
The organization that oversees the Lexington Convention Center and Rupp Arena is laying off 53 employees and asking for city help to restructure debt payments owed on its $275 million expansion as it struggles to stay afloat during the pandemic.
The Lexington Center Corporation, which oversees the recently renamed Central Bank Center, has been hit hard by cancellations at all of its venues — Rupp, the convention center and the Lexington Opera House — since the coronavirus outbreak began in mid-March.
Earlier this spring, it gave short-term furloughs to all but eight of its 122 employees to trim expenses as revenues dried up.
But it was not enough.
Bill Owen, CEO and president of Lexington Center Corp., said the group gave notice June 2 that 53 full-time employees will be laid off effective July 30.
At a Friday meeting, the Lexington Center Corp. board agreed to seek a $2.75 million loan to help cover operating expenses while its venues are dark and no new money is generated.
In addition to its daily operational expenses, Lexington Center Corp. has debt payments related to a currently underway $275 million convention center expansion.
An $8.4 million payment on two different loans is due in September.
The board also voted unanimously Friday to restructure those loans. That allows the group to borrow additional money to make those debt payments for three years.
But the refinancing must also be approved by the Lexington-Fayette Urban County Council.
The $33 million in new borrowing will largely go toward paying off the previous loans for the next three years. The city of Lexington could be on the hook for $1.6 million in additional interest payments as part of the refinancing.
But that’s only if Lexington Center Corp. cannot make those payments. Lexington Center is a subsidiary of the merged government. The city owns the building and leases it back to Lexington Center, which does not receive any direct appropriations from the city’s general fund.
That $1.6 million in additional interest payments are not due for three more years.
Lexington Mayor Linda Gorton warned the Lexington Center in May that it needed to exhaust all options before asking the city and taxpayers to take on additional financial liability. The city of Lexington has previously agreed to borrow or bond $30 million for the convention center expansion. The city makes its own bond or debt payments on that $30 million.
Gorton said Tuesday that she is satisfied Lexington Center has done its due diligence. Restructuring those loans is the most prudent financial option and allows the expansion to go forward.
“We have put together a plan that allows for the completion of the new convention center and Rupp improvements,” Gorton said. “Our plan also protects the government as much as possible, and allows Lexington Center to recover its revenues. Lexington Center’s budget has been hit hard by the pandemic, but so has the city budget. While we can’t leave the convention center and Rupp projects half completed, we also must protect city funds to ensure we can continue to provide basic services.”
Urban County Councilman Bill Farmer Jr. is a member of the Lexington Center Corp. board.
Farmer said the $33 million in new borrowing will keep Lexington Center Corp. solvent during the expansion. The restructuring will give the Lexington Center time to rebuild its business without tapping the city’s already strained coffers, he said.
Owen said the city and taxpayers are not responsible if Lexington Center cannot repay the $2.75 million short-term loan to cover its daily expenses.
“Our hope and expectation is that the refinancing and operating loan will give LCC a couple of years for business to ramp back up. We anticipate the return of our events to a more normal pace will be gradual and the social distancing will impact the size of audiences,” Owen said.
Farmer said Lexington Center’s debt restructuring could be presented to the council as early as next week.
When completed, the expansion will include a new addition, a ballroom, more exhibit hall space, meeting rooms, a new lobby and a new two-story building along Main Street.
Rupp Arena will get a new glass and metal exterior. The expansion is currently on track for a possible completion date in late 2021.
This story was originally published June 16, 2020 at 2:26 PM.
