Metropolitan Opera New York
Moody’s Investors Service downgrades the rating on the Metropolitan Opera Association (NY) Series 2012 bonds to Baa1 from A3 on review for possible downgrade. The rating outlook is negative, Moody’s says in a press release.
The downgrade to Baa1 from A3 under review « incorporates the Metropolitan Opera Association’s weakened financial profile, with a deep operating deficit in FY 2014 leading to a marked decline in unrestricted liquidity. As a result, the opera increased use of an operating line of credit. Further, the Met has granted or is in the process of granting the bank a secured interest in two paintings as well as a portion of its investments, effectively subordinating the interests of unsecured bondholders. »
According to Moody’s, the rating and negative outlook acknowledge that the opera is better positioned to manage expenses with new union wage concessions. However, while the Met has developed a five-year plan to improve liquidity and move to operating equilibrium, the financial analysts say that this plan « remains unproven and dependent on donor support for annual operations as well as endowment. It also requires measured box office revenue growth and heightened expense management. »
The rating outlook could move to stable if the Met is able to rapidly improve operating performance, increase unrestricted liquidity with reduced reliance on its line of credit and remain on track to reaching its endowment growth targets.
