The Los Angeles County Board of Supervisors approved a $14 million private bond offering today, secured by a lease of the Dorothy Chandler Pavilion, to support the Los Angeles Opera.
The unusual and apparently last-minute request for the board's support was required for the LA Opera to meet its debts and maintain a letter of credit, which would otherwise expire next Tuesday, according to opera Chief Operating Officer Steve Rountree.
The nonprofit organization has raised $30 million to retire its debts, but those pledges by private donors will be paid out over the next three years, leaving the opera unable to meet its immediate obligations.
"This loan will be repaid. There's no question about that,'' Rountree said.
Rountree, who is also president of the Music Center, said the opera is breaking even on its operations, having cut administrative costs 22 percent and operating costs 20 percent.
But prior operating deficits and outstanding debts put the organization at risk. The nonprofit's auditor, KPMG, was holding its opinion of the opera's financial viability, pending the result of the board's vote, according to Rountree.
Though county Chief Executive Officer William Fujioka said his staff had been working with LA Opera personnel for months to find a solution to its near-term needs, the supervisors were apparently left out of the discussions about bridge financing.
The assistance to the LA Opera also impacts the Music Center, as the opera pays more than $1.4 million in rent and fees to the center annually.
Antonovich used the opportunity to raise the issue of next year's $32 million production of Richard Wagner's Ring Cycle by the LA Opera, which he has previously criticized because of Wagner's anti-Semitism.
"Is the county going to be underwriting the Ring Cycle?'' he asked, saying he had spoken with opera staffers who believed the production would lose money.
Rountree said the bonds would support retirement of the nonprofit's debt, not the opera's operations or the Ring Cycle production. But he added that he expected the production to break even and generate $20 million in ticket sales alone.
The bonds are expected to be sold with an interest rate of 5.5 percent or less. Interest payments will be made by the county in the form of rent on the Dorothy Chandler Pavilion, but repaid by the LA Opera through a separate note.
The $14 million principal is anticipated to repaid in 2013 through the pledges to the opera by private donors. Many of the individual pledges range from $500,000 to $5 million, according to documentation provided to the board.
The opera was forced to schedule pledges over a three-year time horizon due to the losses suffered by even its wealthy donors during the financial crisis and current recession.
The board voted 4-1 in support of the offering, with Antonovich opposed.
Bank of America Leasing and Capital will manage the offering.
First Published: Dec 8, 2009 4:08 PM CST