Wolf Trap Foundation:

Debt Restructuring Alternatives

T-AFMD-90-34: Published: Sep 27, 1990. Publicly Released: Sep 27, 1990.

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GAO discussed the financial condition of the Wolf Trap Foundation for the Performing Arts and possible alternatives for restructuring its $17-million debt to the U.S. government. GAO noted that: (1) the Foundation reported total assets of $13.9 million in July 1990, of which over $10 million was cash and short-term investments; (2) the Foundation reported non-federal liabilities of about $2.6 million, of which $2 million consisted of deferred revenue from advance ticket sales; (3) the Foundation's net equity amounted to about $11 million as of July 31, 1990, of which $680,000 were endowment funds and $3.5 million were funds otherwise restricted as to use; (4) revenues from ticket sales grew from $7 million in 1988 to $7.5 million in 1989, and as of July 31, 1990, sales were $1 million over the Foundation's projected budget; (5) the Foundation's public fund raising programs amounted to $1.4 million in 1988, $1.1 million in 1989, and $1 million as of July 31, 1990; and (6) federal funding for the Foundation's maintenance and operating costs exceeded $2.8 million annually. GAO believes that: (1) although the Foundation is financially sound, repayment of its federal debt would be burdensome; (2) the Foundation should be able to repay the $8.5-million principal without interest over a reasonable time frame; (3) the Foundation should be able to make annual payments of up to $500,000; and (4) other repayment alternatives included proposed legislation that would forgive the interest owed on the loan or 20- to 25-year repayments with initially reduced payments.

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