NY American Folk Art Museum Bond Troubles

Jeremy Cooke of Bloomberg reports the American Folk Art Museum has not been making required payments into a fund to pay off bond holders.  In order to make bond payment schedules, the museum must use reserve funds, instead of funds promised by benefactor Ralph Esmerian. The museum states it does not have the necessary funds to make either principal or interest payments, and has not made its monthly contractual payment since July.

Cooke reports

New York City’s Trust for Cultural Resources issued $31.9 million in bonds due through 2030 and loaned the proceeds to help construct what became the first new museum building in Manhattan in 35 years. Since July 1, the institution hasn’t made required monthly payments into the fund to meet interest due to bondholders January 2010 and principal due July 2010, according to a disclosure notice signed by Chief Financial Officer Robin Schlinger, dated Nov. 24 and released late last week.

“The institution anticipates that it will not be able to resume these or any other payments with respect to the bonds for the foreseeable future,” the disclosure notice reads.

The 48-year-old museum, whose collection focuses on traditional folk art from the U.S. and works by self-taught artists, reported a deficit of $3.79 million for the year ended June 30, 2008, the latest tax filing available shows. Reserve funds totaled $15.5 million, and remaining tax-exempt bond liabilities $30.5 million, according to the document.

Ralph O. Esmerian, a benefactor of the museum for more than three decades and now chairman emeritus, donated or promised works from his collection of folk art to the museum in 2000. His jewelry business filed for bankruptcy protection in April 2008. Fred Leighton Holding then liquidated inventory and had its Chapter 11 reorganization plan confirmed in November by U.S. Bankruptcy Judge Robert Drain in New York.

To read the full Boomberg article, click HERE.