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Metropolitan Opera Debt Cut to Junk After Virus Ends Season

Metropolitan Opera Debt Cut to Junk After Virus Cancels Season

(Bloomberg) -- The Metropolitan Opera, one of New York City’s cultural icons, had its credit rating cut to junk after canceling its season because of the coronavirus epidemic.

Moody’s Investors Service downgraded $89 million of the opera’s taxable municipal debt two levels to Ba1 and revised its outlook to negative, indicating it could be dropped again. The opera, one of the largest cultural institutions in the U.S., has launched a campaign to raise $60 million to offset box office losses.

“Because the opera operates with very thin liquidity, including high reliance on an operating line of credit, this social disruption and the public health emergency has a heightened credit impact,” Moody’s said in a statement.

The downgrade shows how even some of the wealthiest and most prestigious of the city’s cultural organizations are threatened by the pandemic. The opera, which had $313 million in operating revenue in its 2019 fiscal year, relied on $175 million of donations to support operations.

“While it is disappointing to receive this downgrade as a result of the severe economic implications of the coronavirus pandemic, which is affecting so many arts institutions, the Metropolitan Opera has nevertheless taken a number of immediate actions to stabilize its finances,” Lee Abrahamian, a spokeswoman for the opera, said in an emailed statement.

The opera’s fundraising campaign has already raised $20 million and is expected to yield tens of millions of dollars more in the coming weeks, she said.

The Metropolitan Opera has a $67 million line of credit backed by artwork and endowment funds. The organization had drawn $36.5 million as of July 31, 2018, according to its latest annual report. The opera’s high reliance on the revolving credit agreement will likely increase even as pledges and gifts come in, Moody’s said. The company’s rating action also reflects losses in financial markets that will reduce the value of the opera’s endowment.

The opera was founded in 1883 and moved to its current home, a 3,786-seat house at Lincoln Center, in 1966.

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