Moody's: Chicago Symphony Orchestra Credit Stabilizes

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CHICAGO — Moody's Investors Service revised its outlook on the Chicago Symphony Orchestra's A3 rating to stable from negative in recognition of its improving finances that have benefitted from strong fundraising and more disciplined fiscal policies.

The Nov. 19 action impacts $83 million of bonds from a 2008 issue sold through the Illinois Finance Authority.

"The outlook change to stable is driven by the expectation that CSO's financial operations will continue to benefit from strong fundraising, positive cash flow, and implementation of fiscal policies and disciplines to achieve improved long-term sustainability," Moody's said in its report.

The rating reflects the CSO's prominent position as one of the world's top orchestras, robust fundraising, governance and philanthropic support from a "distinguished and engaged board of trustees," Moody's said.

"These strengths are balanced by the risks associated with a 100% variable rate debt structure, an operating model with high fixed labor costs, and ongoing challenges of growing ticket sales and other earned revenue," Moody's added.

The CSO credit benefits from consistently positive cash flow with attendance and ticket sales improving in fiscal 2013. The organization saw fundraising revenue of $51.6 million in fiscal 2013 for a three-year average of $37.9 million. Its gift revenues accounted for 43% of operating expenses in fiscal 2013, admissions another 36%, and investment income another 18.6%, making the CSO vulnerable to market and economic fluctuations. Fixed-costs for salaries and benefits account for nearly two-thirds of operating expenses limiting its flexibility.

The CSO last year ratified new contracts after a short strike. The CSO's contract expired Sept. 17 2012 and musicians staged a brief strike that resulted in the cancellation of a weekend concert before an agreement was reached Sept. 24 and ratified on Sept. 26. At the time, Moody's rated the orchestra A3 with a negative outlook.

"The expedient ratification of CSO's impasse reflected positively on management, indicating that they have a constructive relationship with musicians," Moody's said at the time. The strike was the orchestra's first in more than two decades.

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