Carrying debt during turbulent economic times continues to cloud the financial picture for the Segerstrom Center for the Arts in Costa Mesa, which on Tuesday saw Standard & Poor's Financial Services downgrade the investment outlook on its $232.5 million in construction bonds from "stable" to "negative."
S&P analysts concluded that while "some aspects of the center's operations have improved over the last year," it hasn't been enough to offset slow progress on a fundraising campaign that remains about $52 million short of its $240-million goal. The bonds were issued to ensure completion of the Renée and Henry Segerstrom Concert Hall, which opened in 2006. The debt is separate from a $1-million recession-fueled deficit the center said this week it had eliminated.
While the analysts report that the center believes the campaign has been "reinvigorated" by $4 million in recent pledges, they remained concerned about fundraising prospects of a campaign now in its 12th year. Furthermore, S&P sees "significant risk" from the looming July 2 expiration of bank guarantees, known as letters of credit, that are intended to reassure investors so they won't demand higher interest on the variable-rate bonds. The banks promise to pay the bondholders should the center default.