Lincoln Center, the heart of New York’s performing arts scene, comprising the New York Philharmonic, the Metropolitan Opera, and the New York City Ballet, has agreed to pay two Wall Street banks $73 million to end its contracted interest-rate swaps, according to a Bloomberg report.

Interest rate swaps, as defined by Investopedia, are forward contracts in which one stream of future interest payments is exchanged for another based on a specified principal amount. The center initiated the swaps in 2006 and 2008, locking in rates on $150 million of floating-rate bonds. When executed in 2006 and 2008, Lincoln Center’s financial move was not uncommon. According to Bloomberg, a wide range of entities from U.S. States to nonprofits borrowed floating rate-rate bonds in conjunction with interest rate swaps.

Lincoln Center’s chief communications and marketing officer, Leah Johnson, stated “that executing the swaps nearly a decade ago made sense. At the time, given the historical interest rate trend line, it seemed like the appropriate course. We’re not going to second guess.” The $73 million used to release Lincoln Center from the derivative trades will be borrowed, with the money coming from its issuance of $140 million fixed-rate tax-exempt debt at a premium to refinance the bonds. The debt is set to be issued in mid-August to pay Morgan Stanley and Bank of New York Mellon Corp.

Lincoln Center paid Morgan Stanley a fixed rate of 3.7% on $95 million of variable-rate debt and Bank of New York 4% on $50 million of bonds, according to Johnson, as cited in the Bloomberg article. In return, the banks paid the center 69% of 3-month London Interbank Offered Rate, or LIBOR — the globally accepted interest rate enumerating borrowing cost between banks.

Over the past decade, long-term rates have nose-dived due to several factors, leaving the center paying above-market rates. The cancellation of the swaps protects Lincoln Center from further rate drops. Currently, the center anticipates a $10 million operating loss and $3 million in restructuring expenses, according to an S&P Global Ratings report released this week. Lincoln Center dismissed 55 employees and furloughed another 150 employees as revenue plummeted due to canceled performances in the wake of the pandemic.