Crisis in Bond Market Hits Orange County Nonprofit

According to a story published in Thursday’s edition of The Orange County Register (Performing Arts Center Loses $13 Million from Bond Market Crisis), crises in the bond market caused the Orange County Performing Arts Center to suffer $13 million in losses during its recently concluded fiscal year. 

According to the news-story, the Center is heavily invested in bonds, which are financing the nonprofit institution’s $240 million expansion, completed in September 2006.  During the last fiscal year, the Center saw its bond insurance policy plummet from an “AAA” rating to junk status, rendering it valueless. Consequently, the Center was forced to write off that insurance to the tune of $8.8 million.  The Center also experienced an unexpected spike in interest rates for its auction-rate bonds from about 3 or 4 percent to 10 percent. Since February, the Center has paid about $4 million in unanticipated bond interest.

Center president Terrence W. Dwyer blamed the current situation on the crisis in the nation’s financial markets:

The turmoil in the nation’s financial markets and auction-rate bond market failure has had a significant effect on the center’s overall financial situation, as it has on many major not-for-profit institutions across the country.

Meanwhile, other California nonprofits have joined the arts center in ditching auction-rate bonds and bond-insurance policies that are no longer secure.  The Register reports that Chapman University, Hoag Memorial Hospital Presbyterian, the Los Angeles County Museum of Art, the J. Paul Getty Trust and the Colburn School have all had to reconsider or refinance their bond issuances.

VEJ