Bangkok--19 May--Standard & Poor's
Standard & Poor's Ratings Services revised the outlook to stable from positive and affirmed its 'A-' issuer credit rating (ICR) on the Seattle Art Museum (SAM), Wash. The outlook revision reflects our view of the significant change in the museum's operating environment from last year, due primarily to a loss of a tenant that it relied on to make lease payments.
"The revised outlook is based on our view of the museum's ability to meet debt service requirements on its Museum Development Authority bonds. SAM lost a major tenant that had effectively funded about $5 million per year in lease payments to the authority," said Standard & Poor's credit analyst Carlotta Mills. "However, we anticipate that the museum will continue to honor all debt obligations and that it will lease all or part of the vacant lease space, with terms at least sufficient to meet its budget and not endanger long-term funding of its cultural mission."
SAM has a 99-year lease agreement, of which $58 million is outstanding, with the Museum Development Authority (MDA) over the next 22 years for four floors of space adjacent to the museum. These lease payments were to be effectively made with rental income from a tenant, Washington Mutual Bank (WM). The lease with WM included a successor clause. However, when WM went into FDIC receivership before being acquired by JPMorgan Chase, Chase was able to bypass the successor clause and terminated the lease with SAM effective March 2009. SAM management reports that it is actively looking for new tenants. JPMorgan Chase, primarily through its foundation, made a $10 million commitment, over five years, to SAM. SAM will utilize this, with some other funds, to cover lease payments for two years. There is also a funded debt service reserve. Museum management has indicated that it intends to continue to make lease payments, is maintaining high levels of liquidity, and has no plans to issue any new debt. If an event of default occurs, the City of Seattle (AAA/Stable) guarantees payment of debt service on the MDA bonds.
The SAM was founded in 1933. It now comprises an art museum in downtown Seattle; an Asian art museum located in a residential neighborhood; and a new eight-acre sculpture garden located just north of downtown.
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Media Contact:
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contacts:
Carlotta R Mills, San Francisco (1) 415-371-5020
Susan Carlson, Chicago 1 (312) 233-7006
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Americas Media Relations: (1) 212-438-6667
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