Moody's Affirms Cleveland Museum of Natural History's A3 Revenue Bond Rating

Strategic Insights -

The Cleveland Museum of Natural History (CMNH) has had its A3 revenue bond rating affirmed by Moody's Investors Service. The museum has $68 million of debt outstanding as of June 30, 2024, with a stable outlook. The affirmation is largely due to the museum's significant wealth and liquidity relative to its operations. CMNH has $185 million of total cash and investments, of which most are considered spendable, providing over four years of operating expenses.

Key Takeaways:

  • The A3 rating reflects CMNH's sizeable wealth and liquidity, which provides a key underpinning of credit quality.
  • The recently opened museum renovation and expansion offers prospects for increased visitor attendance, earned revenue growth, and EBIDA to sustainably cover debt service.
  • Credit challenges include the museum's small scope of operations with high debt relative to operating revenue and elevated fixed costs, with capital expenditures consuming a high 27% of operating expenditures.
  • The line of credit totaling $17.5 million at March 31, 2025, further weakens the museum's leverage profile, although CMNH intends to fully repay it within five years.
  • The Board of Directors is extremely supportive, accounting for approximately half of the museum's fundraising.
  • The stable outlook reflects expectations of healthy donor support and steady growth in earned revenue, supporting stronger margins and debt affordability.
  • The gradual paydown of the line of credit and sustained growth in earned revenue and operating cash flow are factors that could lead to an upgrade of the rating.
  • A substantial decline of monthly liquidity to below 1,000 days, inability to meet fundraising targets, and lack of progress towards repaying the line of credit are factors that could lead to a downgrade of the rating.
  • The museum has protected over 11,000 acres through its Natural Acres Program and is a leader in sustainability through the Green City Blue Lake Institute.

Statistics:

  • Total debt outstanding: $68 million as of June 30, 2024
  • Total cash and investments: $185 million as of June 30, 2024
  • Liquidity: Over four years of operating expenses
  • Capital expenditures as a percentage of operating expenditures: 27%
  • Line of credit: $17.5 million at March 31, 2025
  • Target repayment of line of credit: Within five years

Sources:

  • Moody's Investor Service
  • Nonprofit Organizations (Other Than Healthcare and Higher Education) published in August 2024, available at https://ratings.moodys.com/rmc-documents/426426
  • Rating Methodologies page on https://ratings.moodys.com