Moody's Investors Service last week affirmed its A1 rating on the Indianapolis Museum of Art and revised the outlook to negative from stable, saying the facility faces several challenges.

The actions affect $122.6 million of outstanding bonds.

"The revision of the outlook to negative from stable reflects the museum's exposure to investment returns given its somewhat elevated endowment spending, ongoing need for donor support to sustain operations and make debt-service payments, and limited cushion of liquid and unrestricted funds to demand debt relative to peers," Moody's said in its report.

The museum is a high-profile cultural facility with a strong board, large financial resources and up-to-date facilities, analysts said.

Challenges include an "uncommonly" high operating leverage - its $123 million of debt is at 4.6 times fiscal 2011 operating revenue of $27 million, according to Moody's. In addition, all of the museum's debt is in a variable-rate mode backed by letters of credit from JPMorgan Chase Bank NA.

Cash flow is weak and the museum relies heavily on investment income and gifts.

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