The Met Opera’s Credit Outlook Darkens After Modest Deficits

The Met Opera’s Credit Outlook Darkens After Modest Deficits

The Metropolitan Opera has run small deficits for the past two years and faces rising capital expenses — including for the repair of its white travertine exterior — prompting S & P Global Ratings to announce on Wednesday that it was keeping the company’s “A” credit rating but revising its outlook to negative, from stable.

The negative outlook highlights the continuing financial challenges facing the Met, the largest performing arts organization in the United States. While the company’s new productions this fall have been box office successes — the Gershwins’s “Porgy and Bess” sold out, as have several performances of Philip Glass’s “Akhnaten” — ticket revenues cover less than half the cost of running the huge company, with its orchestra, chorus, star singers and technical crew.

The Met recorded a $1.9 million deficit in 2018, and the company said it expected it to report a $1.1 million deficit on a budget of $312 million in the 2019 fiscal year, which ended July 31. Both recent deficits are small compared with the $22 million shortfall the Met incurred in 2014.

“We understand that the aforementioned deficits are modest in nature, but in our view do not offset the weak available resources,” the S & P report said.

The report also cited the Met’s need for “greater capital spending.” The company has been renovating its backstage facilities for years, and recently began working to repair and, in places, replace its travertine exterior — a multiyear project that could cost $24 million.

The agency said that the Met’s strengths included its good reputation; active board; healthy annual fund-raising, which took in $146 million in 2018; and strong management. It praised the Met’s Live in HD cinema simulcasts for “significantly expanding its revenue base and audience.” But it warned of the company’s weak financial resources — it called the Met’s endowment, valued at $284 million in 2018, “low for an organization of its scope” — and raised concerns about its reliance on large contributions to break even each year.

The reliance on philanthropy was made clear in the report, which said that while 30 percent of the Met’s revenues came from ticket sales and 10 percent from media, roughly 50 percent came from contributions, bequests and releasing assets from restrictions.

Getting into stronger fiscal shape is one of the challenges the Met faces as is enters a new era. The company is also working to emerge from the scandals that led it to dismiss its former music director, James Levine, amid accusations of sexual misconduct, which he has denied. Audiences, critics and the members of the company are warming to the leadership of its new music director, Yannick Nézet-Séguin, who is now in his second year.

This season the Met began offering regular Sunday matinees for the first time, trying to make opera-going more convenient for modern audiences. And it is making changes in some key positions. The company announced last week that Jonathan Friend, who as its artistic administrator since the 1980s has held sway over casting, would step down at the end of the season and be replaced by Michael Heaston, the former executive director of the Met’s young artist program, who currently holds positions at Houston Grand Opera and Rice University.

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