October 13, 2009 | Read Time: 1 minute
While many museums and other cultural institutions face debt, shrinking donations, and investments losses, one of the nation’s top credit-rating agencies calls the sector stable and resilient.
In a paper released this week, credit analysts at Standard & Poor’s say they believe that the nearly three dozen nonprofit cultural institutions the company rates will “manage their businesses reasonably well during this recession,” just as they have weathered past economic downturns. They say that while belt-tightening may become the norm for the organizations, they will likely benefit from an increase in regional tourism, a gain in repeat visits, and government stimulus money for education and science programs.
“They may also be able to weather the storm because they have a diverse revenue base and other mitigating factors,” says Jessica Matsumori, one of the paper’s authors, who describes the 33 cultural organizations that Standard & Poor’s rates as “the cream of the crop.”
Credit ratings determine how much interest organizations must pay when they borrow money or issue bonds. Those with a higher rating pay less. According to the paper, the ratings have been fairly stable, with only one-quarter of the organizations receiving rate changes in the last five years — all but one of those were upgrades.
The paper says that while Standard & Poor’s expects that less debt will be issued this year, the demand for ratings could go up as more organizations restructure their debt to reduce interest costs or exposure to risky investments.
The report, “U.S. Not-For-Profit Cultural Institutions Ride Out a Rough Patch but Still Face a Difficult Journey,” can be purchased by contacting Standard & Poor’s at 212-438-9823 or research_request@standardandpoors.com.
