Bangkok--26 Feb--Standard & Poor's
Standard & Poor's Ratings Services affirmed its 'A' underlying rating (SPUR) on the California Infrastructure and Economic Development Bank's series 2008 variable-rate demand obligations (VRDOs) issued on behalf of the San Francisco Ballet Association, Calif. At the same time, Standard & Poor's revised its outlook on the SPUR to negative from stable. Additionally, Standard and Poor's affirmed its 'AAA/A-2' long-term rating on the VRDOs and withdrew its rating on the ballet's series 2006 bonds, which have been redeemed in full.
"We revised the outlook to negative due to our view of the combination of credit pressures from continuing operating deficits, unsustainable endowment draws, and low financial resource ratios for the rating category," said Standard & Poor's credit analyst Carlotta Mills.
The 'A' SPUR reflects our view of the ballet's:
Solid reputation and status as the country's oldest professional ballet company;
History of break-even operations and recent management expense reductions (although these reductions were achieved with reliance on supplemental endowment draws that are not sustainable);
Completion of a capital campaign with $44.8 million on a goal of $35 million; and
Strategic planning that we expect will address a long-term financial plan, debt management, and a long-term debt repayment strategy.
Based on our criteria, the long-term rating is based on joint support from the Ballet and a direct-pay letter of credit from Allied Irish Bank, based on low correlation.
All of the ballet's outstanding bonds are VRDOs, and constitute a general obligation of the ballet. The series 2008 bonds are the ballet's only long-term debt ($44.9 million). Maximum annual debt service is $5.4 million, making the debt burden high in our view at 12% of 2009 expenses. Principal repayment is back-loaded during the last 10 years of the bonds (2029-2038).
RELATED RESEARCH
USPF Criteria: Non-Traditional Not-For-Profits, June 14, 2007
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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
Jessica Matsumori, San Francisco (1) 415-371-5083