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Metropolitan Opera Makes Debt Debut With $100 Million Sale

Dec. 14 (Bloomberg) -- New York City’s Metropolitan Opera Association, which faces growing operating losses, sold $100 million of debt this week in its first such offer since it was founded more than a century ago.

The bonds were rated A3 by Moody’s Investors Service, its seventh-highest grade. The 12-part sale included 30-year securities that were priced at par and pay a 4.52 percent coupon, data compiled by Bloomberg show. That’s higher than the 4.16 percent yield investors receive from debt with a similar credit grade and maturity, according to Bank of America Merrill Lynch index data.

Founded in 1883, the group will use proceeds to pay down two Bank of America Corp. loans totaling about $63.2 million and end an interest-rate swap agreement with the bank, according to bond documents. Terminating the swap cost $2.6 million as of July 31, according to the offering statement.

The Met is one of the largest opera houses in the world, with more than 200 performances a season. With a 2013 operating budget of $329 million, it has 1,600 full-time and seasonal employees, plus 1,800 part-time workers, according to the bond documents.

Falling Costs

The association sold as company interest rates are close to record lows.

Corporate debt rated A and maturing in 15 years or longer yields an average 4.21 percent, according to Bank of America data. Borrowing costs have dropped from 5 percent a year ago and reached an unprecedented low of 4 percent in July.

The Met’s losses from operations rose 7 percent last season to $135 million, according to bond documents.

Peter Clark, a spokesman for the Met, didn’t have an immediate comment when contacted via e-mail.

Proceeds from the sale will also pay operating expenses, according to bond documents. The notes are taxable securities in the corporate market because of that use, Eric Wild, a managing director in the public finance group at Morgan Stanley, said before they were priced.

The Moody’s report cited both strengths and challenges: The organization has “uncommonly high amount of donor support,” with average gift revenue of $145 million for the past three years.

Yet it also has “high reliance on gift revenue,” the report said.

Box office sales for the first four months of 2012-13 have trailed the Met’s projections and that of last season. The group blamed Hurricane Sandy and the 2011 death of patron Agnes Varis, who underwrote rush seats for which people pay $20 on weekdays and $25 on weekends.

To contact the reporters on this story: Michelle Kaske in New York at; Charles Mead in New York at

To contact the editor responsible for this story: Stephen Merelman at

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