The proposals may include borrowing with the art as collateral (although in the case of default, the collection would remain at risk), or rent portions of the collection out to other national and international museums, as well as have the state pay for use of the art in traveling exhibitions and educational programs.
The article states the emergency manger may be seeking a contribution of between $400 and $500 million from the DI to assistance in the bankruptcy case and in order to show the judge all assets are being considered.
The Detroit Free Press reports
Source: The Detroit Free PressSuddenly, it’s not about “selling” the art anymore, but “leveraging” it.
As Detroit emergency manager Kevyn Orr and leaders of the Detroit Institute of Arts prepare to meet face-to-face for the first time as early as this week, the two sides are now focusing on ways to squeeze cash from billions of dollars of city-owned masterpieces without actually selling them.
Those options might include using art as collateral and renting exhibitions or big chunks of the permanent collection to museums around the world. There’s also a DIA-backed plan for the state to pay hundreds of millions to help financially restructure the city in exchange for creating new statewide traveling exhibitions and educational programs.
The Free Press analyzed the most frequently cited ideas, exploring how they might work, what they might mean for the city and how they could impact the museum. Some may look good on paper, but in practice quickly run into roadblocks. Some ideas still leave the art unprotected. Some face daunting political hurdles, and others, such as renting packaged DIA exhibits worldwide, simply are naive pipe dreams.
No matter how the issue is framed, finding a way to bridge the financial gap between Orr and the DIA remains among the most controversial and vexing subplots of the city’s bankruptcy saga.
The fundamental issue is this: How can the DIA contribute the hundreds of millions in revenue to Detroit’s financial restructuring that Orr expects — without selling art, harming the museum and its reputation, or jeopardizing the $22 million in annual property tax support from Macomb, Oakland and Wayne counties that keeps the DIA afloat.
It won’t be easy to thread the needle. Using the art as collateral, for example, might sound attractive, but if the city borrows against the value and then defaults, it could mean the bank repo man seizing and selling assets.
“Putting the art up as collateral doesn’t protect it,” said DIA chief operating officer Annmarie Erickson. And leveraging is a big gray area: “What does it mean to leverage what we consider a nonsalable asset? That’s a conversation we have to have with the emergency manager’s office.”
How much money does Orr want? The emergency manager’s deputies have repeatedly told DIA leaders that he needs $400 million-$500 million from them to create a revenue stream for perhaps 20 years. But Orr spokesman Bill Nowling said last week that Orr had not settled on a specific number or strategy.
But make no mistake: Orr believes that forging a settlement with creditors and gaining Judge Steven Rhodes’ approval for a restructuring plan hinges on monetizing the art in some way, said Nowling. “We can’t start creating most-favored nation status for different assets,” he said.
Neither the judge nor creditors can force the sale of any asset in municipal bankruptcy, but Orr is under pressure from creditors, Wall Street bankers and union pensioners, among others, to put the art on the table. Rhodes could deny any plan that doesn’t include some contribution from the art, if he thinks the city is hiding assets.
“You can’t pretend the art doesn’t have value,” said Craig Barbarosh, a municipal bankruptcy expert with Katten Muchin Rosenman in Costa Mesa, Calif.
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