Fitch Affirms YMCA of Greater NY Revs at 'BBB'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms the 'BBB' rating on the following bonds issued by the New York City Industrial Development Authority (NYCIDA) on behalf of the Young Men's Christian Association of Greater New York (YMCA, or the association):

--$60.9 million NYCIDA civic facility revenue bonds (YMCA Project).

The Rating Outlook is Stable.

RATING RATIONALE:

--The YMCA's capable and proactive financial management team, a large and geographically diversified membership base for its YMCA branches, long-standing programmatic and financial ties with New York City and State, and solid debt service coverage from operations, all underpin the 'BBB' rating.

--Offsetting credit factors include a relatively light financial cushion provided by available funds, and an ongoing need to invest in capital improvements for its extensive network of branches.

--The association plans to rely on a mix of gifts, grants, and public-private partnerships with real estate developers and the City of New York to support its capital investment efforts, and it will continue to utilize intermediate-term bridge financing which presents a limited amount of rollover risk.

KEY RATING DRIVERS:

--Careful expense management, especially as New York City and State implement budgetary cuts which could reduce a key revenue stream for the YMCA.

--Alignment of capital spending plans and use of bridge financing with receipt of capital gifts and grants.

SECURITY:

The bonds are an unsecured general obligation of the YMCA.

CREDIT SUMMARY:

The YMCA's financial management team closely monitors operations across its various facilities, and makes timely adjustments. Since 2005, each YMCA branch has developed an annual contingency budget indicating how it would offset unanticipated revenue declines of up to 10%. Management reports activating contingency plans several times to address revenue shortfalls. After a sharp decline in 2008 (fiscal year-end Dec. 31), unrestricted operating revenues rebounded strongly in 2009. Preliminary results for 2010 indicate revenues continued to improve. Membership-based revenues are the association's largest funding source, generally accounting for approximately 60% of unrestricted operating revenues. Total membership at Dec. 31, 2010 was up 1.9% from the prior year, with growth at several new facilities offsetting declines at older ones. Fitch notes that continued capital investment in renovations and new facilities are needed to sustain membership levels.

While the association's operating margin remained breakeven or slightly negative between 2006 and 2009, debt service coverage was solid. As calculated by Fitch from audited financial statements, YMCA operating income covered maximum annual debt service (MADS) at least two times (x) between 2006 and 2009. Based on preliminary results for 2010, Fitch anticipates similar coverage levels. Continued stable operations will be important as the association's financial cushion is modest. Available funds at the end of 2009 covered annual operating expenses by just 22.1% and total debt by 39.8%. Strong market performance in the association's relatively conservative portfolio led to some gains in 2010, but the lack of a substantial resource base, coupled with a breakeven-to-negative margin, continues to be a primary credit concern.

The YMCA's capital plans include several new or renovated facilities across the city, which are expected to be financed through donations, governmental grants, and through public-private partnerships with the City of New York and real estate developers as part of large multi-use development projects. To fund much of its own short-term construction costs, the association utilizes bridge financing, primarily through a standing $16 million loan ($10 million outstanding on Dec. 31, 2010) with JP Morgan Chase (the bank) that is currently set to mature on Feb. 1, 2012. Management works closely with the bank and expects to either repay the loan with gifts and grants, or extend the expiration date. Any unexpected delays in monetizing anticipated receipts could require use of the association's limited reserves, and exert negative rating pressure.

The YMCA of Greater New York is a not-for-profit, community service organization offering education, recreation and health programs. It has 20 full-service branches located throughout the five boroughs of the city and resident camps in upstate New York. The association is the largest YMCA in the country and the largest private youth serving agency in the city. In fiscal 2010, government contracts (primarily from the state and city) accounted for 14.5% of the association's unrestricted operating revenues.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

--'Revenue-Supported Rating Criteria', dated Oct. 8, 2010.

For information on Build America Bonds, visit www.fitchratings.com/BABs.

Applicable Criteria and Related Research:

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564565

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