Fitch Affirms Alvin Ailey Dance Foundation, NY's Revs at 'A-'; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed the 'A-' rating on approximately $13.8 million of outstanding series 2003 revenue bonds issued by the Trust for Cultural Resources for the City of New York (TCR) on behalf of the Alvin Ailey Dance Foundation (AADF). The rating is an underlying rating, given without consideration of credit support provided through a letter of credit issued by Citibank, N.A.

The Rating Outlook is Stable.

SECURITY

The bonds are secured by general obligation loan payments from AADF to TCR.

SENSITIVITY/RATING DRIVERS

STABLE CREDIT CHARACTERISTICS: The 'A-' rating reflects AADF's history of positive operating margins, with surpluses that supplement balance sheet resources and provide strong liquidity, and its highly manageable debt burden with no additional debt plans. The aforementioned are offset by AADF's heavy reliance on discretionary revenues. These discretionary revenues are diversified and exhibit positive trends.

HISTORY OF OPERATING SURPLUSES: AADF operations reflect a sustained track record of positive margins due to management's ability to increase performance and educational based revenues while actively managing expenses.

RELIANCE ON DISCRETIONARY REVENUES: AADF is reliant on public support and performance fees, both of which can vary from year to year, and are discretionary sources of revenue.

PREMIER REPUTATION: The Alvin Ailey American Dance Theater's (AAADT) long-standing and international reputation and prominent location at City Center in New York City continues to attract a donor base of substantially wealthy individuals and institutions and experiences relatively stable public support levels which add to its operating flexibility.

CREDIT PROFILE

Available funds, defined as cash and investments less permanently restricted net assets, are strong and have grown over time, and totaled $61.2 million at the end of fiscal 2012, accounting for 182% of expenses and 445% of long-term debt. AADF's investment portfolio continues to reflect a balanced approach, despite higher allocations to equities and alternative investments than in previous years, typical of the non-profit sector. Given AADF's balanced investment portfolio strategy and positive operations, financial resources for AADF are expected to remain at current levels. Overall, Fitch believes AADF's liquidity position relative to its operating and debt profile is strong and appropriate for an 'A-' rating.

AADF's diligent management practices continued to produce a solidly positive operating margin in fiscal 2012. AADF's margin increased to 4.8% in fiscal 2012, from 0.4% in fiscal 2008, when decreased public support and increased marketing and public relations expenses resulted in a weak margin. Fitch views management's ability to realign expenses to match revenues and focus on annual surplus generation and liquidity growth as a credit positive.

AADF's three main sources of income are performance-based revenues (36%), public support (29%) and educational activities (23%). AADF has demonstrated operating flexibility in a challenging environment by realizing revenue growth from educational activities and has been aided by performance fees which have trended positively for the past three years. AADF performance-based revenues generally offset related expenses as the foundation has full control over these variable expenses and can lower payroll costs for touring personnel in the event of fewer performance weeks.

AADF's debt burden is low at 3.4% and the foundation has no future debt plans at this time. AADF's entire capital structure is composed of variable-rate debt of $13.76 million, supported by a letter of credit issued by CitiBank (expiring in 2016). The foundation synthetically fixed the interest rate on the bonds with a fixed payor swap. At FYE 2012, the current mark-to-market valuation for the swap was negative $2 million, which does not require a collateral posting.

AADF has been instrumental in supporting the activities of the Alvin Ailey American Dance Theater (AAADT), founded in 1958. AADF leverages its prominence and promotes its popularity domestically and internationally, for the purpose of furthering the education about the inspiration, meaning and significance of Alvin Ailey's modern dance masterpiece reflecting African American heritage.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Revenue-Supported Rating Criteria', dated June 12, 2012;

--'Nonprofit Institutions Rating Criteria', dated June 15, 2012;

--'Fitch Upgrades Alvin Ailey Dance Foundation NY's Revs to 'A-'; Outlook Stable', Feb 11, 2011.

Applicable Criteria and Related Research:

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=681015

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Contacts

Primary Analyst
Nancy Faingar
Director
1-212-908-0725
Fitch, Inc.
1 State Street Plaza
New York, NY 10004
or
Angie Guerrero
Director
1-212-908-0259
Committee Chairperson
or
Joanne Ferrigan
Senior Director
1-212-908-0723
or
Media Relations
Elizabeth Fogerty
+1-212-908-0526
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Primary Analyst
Nancy Faingar
Director
1-212-908-0725
Fitch, Inc.
1 State Street Plaza
New York, NY 10004
or
Angie Guerrero
Director
1-212-908-0259
Committee Chairperson
or
Joanne Ferrigan
Senior Director
1-212-908-0723
or
Media Relations
Elizabeth Fogerty
+1-212-908-0526
elizabeth.fogerty@fitchratings.com