Woodruff Arts Center credit outlook dropped to negative as revenues deteriorate
By David Pendered
The Woodruff Arts Center saw its credit outlook downgraded from stable to negative as analysts expect further weakening in revenues. In addition, revenues had been declining for years before COVID-19, Woodruff has disclosed to investors.
The downgrade was made public eight weeks before Robert Spano’s move to the Fort Worth Symphony Orchestra was announced, on Feb. 9. Spano this year is concluding a 20-year tenure as music director of the Atlanta Symphony Orchestra, an affiliate of the Woodruff Arts Center. Spano starts the first phase of his new job in Texas, as music director, on April 1.
Moody’s Investors Service downgraded the credit outlook of Robert W. Woodruff Arts Center, Inc. from stable to negative in a rating action dated Dec. 15, 2020. The action affects $112 million of rated debt for bonds that are to mature in 2044.
Woodruff’s credit rating was not affected and remains investment grade, at A2. However, analysts warned the rating is subject to a downgrade in the upcoming fiscal year if Woodruff’s financial picture doesn’t improve.
In its rating outlook, Moody’s observed:
- “The negative outlook reflects our expectations of heightened revenue pressures and further operating performance weakening into at least fiscal 2021 driven by the ongoing business disruption caused by the coronavirus. A failure to achieve materially improved operating performance by fiscal 2022 could lead to a downgrade of the rating.”
Moody’s cited Woodruff’s “already thin operating performance for fiscal 2021 due in large part to the continued business disruption caused by the coronavirus pandemic….” Woodruff reported an operating revenue of $84 million in the previous fiscal year, 2020, Moody’s reported.
Woodruff provides a glimpse into the operating performance in a continuing disclosure filed Nov. 25, 2020 and posted by the Municipal Securities Rulemaking Board. The disclosure provides audited financial information for the fiscal year that ended May 31, 2020.
The report shows a pattern of declining revenues across the Woodruff’s operating divisions – Alliance Theater, Atlanta Symphony Orchestra and High Museum.
Attendance has plummeted for performing arts since 2016. Attendance has dropped at the museum, but by a smaller proportion, according to the disclosure:
- 2016 – 112,422
- 2020 – 69,346
- Decline – 38%
Atlanta Symphony Orchestra
- 2016 – 177,645
- 2020 – 71,387
- Decline – 60%
- 2016 – 363,676
- 2020 – 323,194
- Decline – 11%
A bright spot in Woodruff’s fiscal scenario is its large scale in the region and the depth of its philanthropic supporters. In their rationale of the A2 credit rating, Moody’s analysts observed:
- “The A2 is supported by Woodruff’s favorable market profile as a large, diverse cultural institution in Atlanta with very good revenue diversity. As a prominent community institution, Woodruff receives very strong philanthropic support with three-year average gift revenue of $40 million and donor contributions accounting for about one-third of total revenue.
- Further, sizeable absolute wealth of $425 million and strong unrestricted monthly liquidity covering 336 days of expenses provide ample runway for managing through the current period of significant business disruption caused by the coronavirus pandemic.”