Fitch Rates YMCA of Greater New York $36MM 2006 Rev Bonds 'BBB+'.

NEW YORK -- Fitch Ratings assigns a 'BBB+' to the YMCA of Greater New York's $36 million, series 2006, civic facility revenue bonds, and affirms the 'BBB+' rating on $37.4 million of outstanding series 1997 and 2002 parity bonds. The series 2006 revenue bonds will be sold via negotiation during the week of June 26 by Goldman, Sachs and Co. The Outlook is Stable.

Proceeds of the series 2006 bonds will be used to acquire condominium units in Brooklyn and Manhattan, and construct, renovate, equip and/or furnish six facilities in Brooklyn, Manhattan, Queens and Staten Island, fund a debt service reserve fund and pay issuance costs. The short-term debt is expected to be repaid on or before fiscal 2009 with proceeds from New York City grants, gifts and or operating cash flow.

The rating reflects the YMCA of Greater New York's (the YMCA, or the association) post-fiscal 2004 improving revenue and operating trends, favorable business prospects, the direct membership and revenue benefits resulting from the capital projects financed with series 2006 bond proceeds and interim short-term debt, and strong net asset position augmented by real estate assets. The association's formidable governing board and new senior management are focused on membership and revenue growth, ensuring the association's financial viability with better cost and financial controls and upgrading capital assets.

The rating is also supported by the association's long history, community reputation, large membership base serving over 350,000 adults and youths, and status as the city's leading community-based youth services provider with long-standing programmatic ties to the City of New York.

For the fiscal year ended June 30, 2005, the YMCA posted operating revenues of $128.7 million and operating income of $5.4 million. The opening, expansion, and ramp-up of new facilities, the recent up-tick in New York City's tourism and proactive marketing initiatives have had a direct and positive impact on membership, revenue and operating trends since fiscal 2004. After a three-year period of declining revenues, total revenues were up 9% in fiscal 2005 excluding non-operating contributions in the form of discounted purchase price for a building.

Fiscal 2005's operating income rebounded from fiscal 2004's break-even performance (net of severance costs and a receivables write-down). Double-digit revenue growth is continuing in fiscal 2006. Four-month interim results as of April 30, 2006 reflect a continued up-tick in the association's operating trend due to growth in revenues and new management's improved cost controls.

The principal credit risks are the YMCA's near-term balance sheet weaknesses, which include limited and stagnant liquidity and increasing debt burden. From an income statement and balance sheet perspective, debt leverage should remain manageable following the issuance of up to $36 million of series 2006 bonds and increased dependence on a $14 million line of credit for interim capital project financing.

Pro-forma maximum annual debt service would consume less than 5.2% of revenues assuming a 30-year amortization of short-term debt, and pro forma historical coverage exceeds 2.2 times (x) for fiscal 2005. Pro-forma liabilities equal 35% of total assets. The YMCA's net asset position continues to grow. Consequently, the ratio of total net assets to pro-forma liabilities and net assets equals 57%, and provides an ample cushion for compliance with debt covenants.

Total cash and investments have remained static since fiscal 2003 due to limited profitability, higher capital spending, and the YMCA's endowment spending policy. As of Dec. 31, 2005, available cash and investment excluding restricted endowment funds totaled about $35 million and benefited from growth in trade payables. Available funds cover only 29% of fiscal 2005's operating expenses and 42% of pro-forma debt. Liquidity risks are exacerbated by a high 80% exposure to equity investments and management's desire to replenish certain aging capital assets. In the absence of another significant capital campaign, management will not be able to shore up cash reserves until the capital projects are completed by fiscal 2008, capital spending moderates, and grant reimbursement has been collected to pay off the capital line of credit. Any material reduction in liquidity or increase in debt could have a negative impact on the Rating Outlook and rating.

The YMCA of Greater New York is a not-for-profit, community service organization with 19 branches located throughout the five boroughs of New York City and in resident camps in upstate N.Y. This YMCA is the nation's largest YMCA and operated since 1852. The association provides health enhancement, residence, community development, child and teen development, camping and international programs.

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