The Juilliard's School's outlook was revised to negative from stable by Moody's Investors Service, which sees risks in with the New York-based performing arts conservatory's global expansion plans.
Moody's analyst Michael Osborn in Thursday's reports said Julliard's "ambitious global strategy" will lead to "deep" operating losses through the 2017 fiscal year. Osborn said the school based in Manhattan's Lincoln Center for the Performing Arts is also hurt by investment losses suffered in the 2016 fiscal year, which will weaken reserves.
Moody's affirmed its Aa2 rating on Julliard's $125 million of Series 2009A and B revenue bonds maturing in 2039 and 2036, respectively. The bonds were issued through The Trust for Cultural Resources of the City of New York.
"The Aa2 rating remains supported by Juilliard's prominent international reputation, sizeable financial reserves that provide good financial flexibility as new programmatic investments are being made and potential for continued favorable fundraising," said Osborn. "The rating also incorporates the school's high leverage relative to operations and back-loaded debt structure."
Osborn noted that for Juilliard to receive a bond upgrade it must display stronger cash flow to support debt service and "substantial" increase in cash and investments. A downgrade could occur if the school shows an inability to translate new business lines into profitability or if no improvement in financial operations is demonstrated starting in the 2018 fiscal year. Moody's will also be closely tracking to see if there is a material loss of financial resources or weakened liquidity.
The Juilliard School was founded in 1905 and has a global reputation for training the world's top musicians, dancers and actors. The school admitted only 7% of applicants in the fall of 2015 66% of the admitted students for its undergraduate programs chose to attend, according to Moody's.
