THE ART IN­STI­TUTE OF CHICAGO WON

The Bond Buyer - - Front Page - BY YVETTE SHIELDS

a rat­ings boost into the dou­ble-A cat­e­gory in recog­ni­tion of its steady de­cline in debt and stronger re­serves. Moody’s In­vestors Ser­vice raised the mu­seum’s rat­ing to Aa3 from A1 and as­signed a stable out­look to the in­sti­tu­tion’s $165 mil­lion of un­se­cured gen­eral obli­ga­tion bonds is­sued through the Illi­nois Fi­nance Au­thor­ity and for­mer Illi­nois Ed­u­ca­tional Fa­cil­i­ties Au­thor­ity

CHICAGO – The Art In­sti­tute of Chicago won a rat­ings boost into the dou­ble-A cat­e­gory in recog­ni­tion of its steady de­cline in debt and stronger re­serves.

Moody’s In­vestors Ser­vice raised the mu­seum’s rat­ing to Aa3 from A1 and as­signed a stable out­look to the in­sti­tu­tion’s $165 mil­lion of un­se­cured gen­eral obli­ga­tion bonds is­sued through the Illi­nois Fi­nance Au­thor­ity and for­mer Illi­nois Ed­u­ca­tional Fa­cil­i­ties Au­thor­ity.

The ag­gres­sive pay down of debt and im­proved re­serves “is in line with its pri­or­i­ties and was funded by very good fundrais­ing and strong cash flow gen­er­a­tion,” Moody’s said of the in­ter­na­tion­ally known art mu­seum and school.

The mu­seum has paid down $98.5 mil­lion of debt over the last five years, a move al­lowed by strong cash flow that has also pro­vided fund­ing for cap­i­tal ex­penses and art ac­qui­si­tions.

Fis­cal 2019 re­sults are ex­pected to ben­e­fit from steady growth in tu­ition rev­enues and stable mu­seum rev­enues. In­vest­ment in­come and gifts also are a pri­mary rev­enue stream, ac­count­ing for more than 30%, with net tu­ition rev­enues of the school mak­ing up 44%. The mu­seum’s di­verse rev­enue streams pro­vide a key credit strength. The In­sti­tute has $274 mil­lion in op­er­at­ing rev­enue .

To­tal cash and in­vest­ments of $1.1 bil­lion fur­ther en­hance the bal­ance sheet. The mu­seum has ben­e­fited from “ex­cel­lent” fundrais­ing, av­er­ag­ing $69 mil­lion in gift rev­enues for the last three fis­cal years, Moody’s said.

Chal­lenges in­clude a debt struc­ture that re­lies heav­ily on bul­let ma­tu­ri­ties, as well as com­pet­i­tive pres­sures on both mu­seum vis­i­tors and art school en­roll­ment and re­lated rev­enue streams. More than $30 mil­lion ma­tures in fis­cal 2019 and AIC in­tends to make sched­uled prin­ci­pal re­pay­ments and re­fi­nance a ma­tur­ing bank note.

“The stable out­look re­flects ex­pec­ta­tions of con­tin­ued strong cash flow and main­te­nance of its im­proved lever­age pro­file,” Moody’s said. “We ex­pect fa­vor­able op­er­at­ing per­for­mance to be sup­ported by steady stu­dent de­mand, donor sup­port and mu­seum vis­i­tor­ship.”

Moody’s ex­pects any sig­nif­i­cant cap­i­tal spend­ing would be off­set by phil­an­thropic sup­port for the re­lated projects.

The Art In­sti­tute’s in­ter­na­tional rep­u­ta­tion is con­sid­ered a credit strength. The in­sti­tute drew 1.6 mil­lion vis­i­tors in fis­cal 2018, up from 1.4 mil­lion five years ago. The In­sti­tute is a well-known art and de­sign school with over 3,600 un­der­grad­u­ate and grad­u­ate stu­dents, up 6.8% from five years ago.

The mu­seum in down­town Chicago is one of 11 mu­se­ums lo­cated on Chicago Park District land and does face some risk in at­ten­dance, which may fluc­tu­ate depend­ing on the pop­u­lar­ity of ex­hi­bi­tions and Chicago tourism.

The district sends $5.4 mil­lion, or about 2% of rev­enues, to the mu­seum which demon­strates an im­por­tant link­age be­tween the mu­seum and the city of Chicago as a key mem­ber of the city’s cul­tural land­scape, Moody’s said.

“The in­sti­tute ben­e­fits sig­nif­i­cantly from tourism, with ap­prox­i­mately 50% of vis­i­tors orig­i­nat­ing from out­side Chicago, of­fers many cul­tural and other of­fer­ings to at­tract the leisure dol­lar,” Moody’s said. ◽

The Chicago Art In­sti­tute got a rat­ing boost to Aa3 from A1 from Moody’s In­vestors Ser­vice, which cited its de­clin­ing debt and stronger re­serves.

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