NYC’s Metropolitan Opera, Burning Cash, Collateralizes Chagalls

New York City’s Metropolitan Opera Association had its rating cut by Moody’s Investors Service to three steps above junk and is again turning to works by Marc Chagall for collateral as its cash dwindles.

The nation’s largest performing-arts organization is putting the Chagalls hanging in its lobby -- “The Triumph of Music” and “The Sources of Music” -- up as collateral on a line of credit with Bank of America Corp., Sam Neuman, a spokesman for the opera, said in an e-mail today.

The opera is tapping the paintings anew after using a $100 million bond sale to pay off bank loans backed by the artwork in 2012. Moody’s today lowered that debt one level to Baa1 and assigned a negative outlook, meaning more cuts are possible. The Met’s deficit ballooned to an estimated $22 million in fiscal 2014, from $2.8 million in 2013, according to financial documents.

The opera, which had its first performance in 1883, expects to balance its budget in the next two years by cutting expenses such as labor costs, Neuman said.

“Recent changes at the Met -- including the implementation of our historic new union agreements, and a program of institution-wide cost controls -- are expected to lead to balanced budgets in fiscal year 2015 and fiscal year 2016 while significantly strengthening the long-term financial prospects of the institution,” Newman said in the e-mail.

In fiscal 2013, the organization had monthly liquidity of $46 million, covering 53 days of cash expenses, according to Dennis Gephardt, a Moody’s analyst. Without a $17 million draw on its line of credit, liquidity fell in half, according to preliminary fiscal 2014 results, Gephardt wrote in today’s report.

“Without a rapid turnaround in operating performance, the organization’s unrestricted liquidity could erode further,” Gephardt wrote.

Thomas Rottcher, a spokesman at Bank of America in New York, didn’t have an immediate comment.

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