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Met Opera to Sell $100 Million in Bonds as Revenue Drops

Lincoln Center
The Metropolitan Opera House at Lincoln Center. Photographer: Paul Goguen/Bloomberg

Dec. 11 (Bloomberg) -- The Metropolitan Opera faces growing operating losses as it prepares to sell bonds for the first time since its founding in 1883.

Losses from operations swelled 7 percent last season to $135 million, according to bond documents. It was the third consecutive operating-loss increase.

After contributions, bequests and other income from donors, the Met said it broke even in 2011-12. The $100 million in taxable bonds will be used to repay $63.2 million in loans from Bank of America Corp.

Most of the remainder will pay for unspecified “operating capital,” said Eric Wild, a managing director in the public-finance group at Morgan Stanley, which is managing the bond sale.

The offering comes as operating expenses increased 15 percent during the past three years and operating revenue rose 11 percent, according to the offering memorandum.

Wild said the Met is taking advantage of low interest rates. Asked if it’s under pressure, he said investors have to draw their own conclusions.

“The offering documents provide a description of the financial condition of the Met,” he wrote in an e-mail. “Prospective investors should review it completely and base their decisions on such a review.”

Japan Tour

Met operating revenue fell last season to $170.2 million from $184 million, an 8 percent drop. It was the company’s first revenue decline in at least four years.

Sales for the season ending July 2011 were skewed upwards by a Met tour of Japan, while box-office receipts at its Lincoln Center for the Performing Arts home declined slightly during the latest fiscal year.

Box office for the first four months of 2012-13 has lagged behind the Met’s projections and that of last season. The Met blamed Hurricane Sandy and the July 2011 death of mega-patron Agnes Varis, a generic-drug mogul who underwrote rush seats for which people pay $20 on weekdays and $25 on weekends. A Met spokeswoman, Lee Abrahamian, said that although the program is ongoing, funding was reduced.

Market Fluctuations

As of July 31, 2012, the Met had $280.2 million in pension obligations, up from $220.4 million a year earlier. Its unfunded obligations almost doubled to $128.4 million from $73.1 million.

“The Met is current with its plan funding obligations,” according to the offering memo. But “the low interest rate environment, as well as market fluctuations” have had “a significant impact on the unfunded liability.”

Moody’s Investors Service rates the sale A3, its seventh-highest grade. A Moody’s report cited two sides of the same coin as strengths and challenges: The Met has “uncommonly high amount of donor support,” with average gift revenue of $145 million for the past three years.

However, it has “high reliance on gift revenue,” “requiring careful stewardship and cultivation of donors,” the report noted.

Wild said he expects the bonds to be priced and sold at the end of the week. As they aren’t tax-exempt, unlike municipal bonds, he said they’ll probably appeal primarily to institutional investors, such as pension funds and insurance companies.

Muse highlights include Laurie Muchnick on books, Patrick Cole on philanthropy.

To contact the reporter of this story: Philip Boroff in New York at

To contact the editor responsible for this story: Manuela Hoelterhoff in New York at

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