Moody's downgrades the Met and The New School

Moody's Ratings downgraded two New York City cultural institutions in one day, as the arts industry feels the squeeze of declining revenues.

Moody's downgraded the Metropolitan Opera Association to Caa1 from B3 and The New School to Baa1 from A3 Tuesday.

The Metropolitan Opera's rating has declined precipitously over the past six years. The COVID-19 pandemic, which caused the cancellation of performances, first drove the opera into junk territory, and it was downgraded to B3 in August of last year.

In its rating report, Moody's notes the Met's "pronounced structural deficit" and "three years of extraordinary endowment draws" totaling $120 million. The opera house is dealing with poor liquidity, eroding total cash and investments, and full reliance on a bank line that will expire in February 2027, Moody's said. It assigns a negative outlook after the downgrade.

"Absent a material cash infusion ? such as through the major licensing agreement or the receipt of a sizable bequest that are currently anticipated ? the Met is likely to confront a substantial budgetary shortfall in fiscal 2026, potentially requiring further unsustainable endowment draws," Moody's analysts wrote.

The rating also bears a negative outlook, reflecting "the risk that potential one-time sources of cash may be delayed or fail to materialize."

The association's total debt outstanding was $178 million as of June 30, 2025, Moody's said. None of the Met's debt is tax-exempt, the association reported in its most recent available Form 990 tax return, for 2003.

The Met's fiscal 2025 operating revenue was around $281 million, according to Moody's. Founded in 1883, it is the country's biggest and most prestigious opera house.

"The Met's renowned global brand and exceptionally strong donor base, together with the potential for extraordinary revenues and planned cost reductions, could support credit improvement," Moody's analysts wrote. But the endowment draws and liquidity constraints will impede the opera house's credit quality for years to come.

The rating report for The New School's downgrade noted the private university's strengths, including a strong brand, "highly valuable and marketable" Manhattan real estate, and flexibility from its "sizable financial resources."

The downgrade was driven by declining net tuition revenue, enrollment declines, inflation pressures, and an elevated leverage position. Additionally, The New School's increased short-term borrowing will pressure its near-term liquidity, Moody's analysts wrote.

"Management has articulated a comprehensive restructuring plan that involves significant workforce reductions, a gradual shift from leased to owned space and academic reorganization aimed at better aligning the cost structure with student demand trends," Moody's analysts wrote.

Moody's revised the New School's outlook to stable from negative at the new rating.

That's because it's projected to meet its enrollment objectives for the fall 2026 semester and achieve debt service coverage of at least 1x. The New School has $1 billion of outstanding debt, according to the report. It has issued tax-exempt bonds through the Dormitory Authority of the State of New York.