Financially Troubled Aquarium Seeks to Refinance Debt

Faced with declining attendance and revenue, the Long Beach Aquarium of the Pacific announced a plan Tuesday to refinance about $115 million in bonds--a step that could lower its debt payments and help balance its budget next year.

Aquarium officials say the proposal is part of a new business strategy designed to improve the delicate financial condition of the facility, a crucial component of waterfront redevelopment plans in Long Beach.

“We are very optimistic,” said Tammie Brailsford, the aquarium’s chief operating officer. “Our operation compares very, very favorably with other aquariums around the nation in terms of efficiency, displays and attendance. We believe we are positioned for a strong future.”

The attraction has been suffering a steady decline in revenue and attendance since its strong opening in June 1998. Aquarium officials say they expect final attendance figures for the fiscal year ending Sept. 30 to show 1.1 million visitors. That number would meet the aquarium’s revised attendance goal but it is well below initial projections of 2 million visitors a year.

With enough exhibit space to fill three football fields, the Aquarium of the Pacific displays about 12,000 animals from about 550 species, ranging from sharks and sea lions to delicate sea horses and moon jellies. The latest available financial statements for October 1999 through June 2000 show that the aquarium expected $17.9 million in revenue but received only about $12.3 million for the nine-month period. Reported losses, after subtracting depreciation, were about $2.2 million. The figures do not reflect the busy summer months.

Aquarium officials say the setbacks have triggered a variety of budget cuts and fund-raising efforts over the last year, such as staff reduction and searches for government funding and more corporate sponsorships.

The latest strategy includes new displays, increased marketing, plans to double after-hours events, and more behind-the-scenes tours for visitors that might build gate receipts.

In addition, city and aquarium officials are looking into ways to refinance $115 million in bonds that were sold to investors to pay for construction. The aquarium’s annual payment to bond holders is about $9 million to $10 million a year.

Bob Torrez, the city’s finance director, is considering several options to restructure the debt so the aquarium might be able to save as much as $2 million in bond payments a year for three to four years. Torrez, who cautioned that the figures are tentative, likened the situation to refinancing a home.

“This could give them some cash flow and breathing room,” he said. “Their budget is real tight right now. They don’t have a whole lot of flexibility. We hope the restructuring will result in permanent savings.”

As a second benefit, Torrez said, the refinancing will reduce the exposure for the city, which has pledged hotel taxes and certain port revenue to cover the aquarium’s debt service if revenues fail to cover it.

“Their budget is so inflexible that any deviation could result in a call on city pledges,” Torrez said. “The aquarium budget has no room for error. If an economic situation arises it could impact their budget.”

Critics of the aquarium say they doubt the $120-million attraction can refinance the bonds, given the drop in attendance and revenue. There is more risk for investors, they say.

“We are in the same interest rate environment as when the first bonds were issued,” said Norm Ryan, an investment banker who led a successful drive to cut the city’s utility tax this year. “Attendance has dropped, and the market will be less receptive because people know how bad the situation is.”

Aquarium officials predict that the new business strategy will help increase visitors in the years ahead. They point out that the facility has made all its bond payments in full and on time, without relying on its bond reserves.