Christie's Crimps Detroit Appraisal
Detroit -- The museum's cache of art is worth no more than $867 million -- less than Detroit creditors claim it could generate to help repay them -- an appraiser told a federal judge yesterday who is overseeing the city’s bankruptcy trial.
Art collectors of ArtKabinett social media network have been following the tug-of-war between the Detroit Institute of Arts and the city's bankruptcy creditors.
The city’s last remaining major creditor, Financial Guaranty Insurance Co., has attacked the proposal to raise more than $800 million from donors and the state in return for protecting the Institute's art from sale.
Vanessa Fusco, a vice president with the auction house Christie’s, defended the appraisal, including a decision to ignore more than 1,000 works that had “incredibly minimal” value. Christie’s evaluated about 1,750 of the works, according to court documents.
“Not every work of art in a museum is a masterpiece,” Fusco told U.S. Bankruptcy Judge Steven Rhodes yesterday.
Rhodes is holding a trial to help him decide whether Detroit’s bankruptcy plan is feasible and fair to creditors.
FGIC argues the plan is unfair because it’s getting much less than the city’s retirees, whose pension system is being bolstered by money from a group of donors, private foundations and the state.
As a bond insurer, FGIC could face claims of $1.1 billion from pension debt investors who may be nearly wiped out by Detroit’s debt plan. Under the plan those investors would be paid about 10 percent of what they are owed and FGIC may be forced to make up any losses.
Detroit Institute of Arts houses some of the world’s most important works, Fusco testified, including Pieter Bruegel the Elder’s “The Wedding Dance” and one of Auguste Rodin’s “The Thinker” sculptures.
FGIC paid for its own appraisal on the art and found the city could sell some works for about $1.5 billion, or use the collection as collateral for a $2 billion loan, according to a court filing.
Christie’s found that part of the collection was worth only from $454 million to $867 million.
About three-quarters of the value came from just 11 pieces. Those included “The Wedding Dance,” worth as much as $200 million; Vincent van Gogh’s “Self-Portrait with a Straw Hat,” as much as $150 million; Rembrandt’s, “The Visitation,” worth as much $90 million; and Henri Matisse’s, “Le Guéridon,” as much as $80 million.
The Christie's estimate didn’t cover at least 327 pieces that creditors say include masterworks by artists including Edgar Degas, Pablo Picasso and Andy Warhol, according to the court filing.
The museum opposes a sale, citing a legal opinion from Michigan’s attorney general that the art is held in a charitable trust and can’t be part of any auction to satisfy the city’s debts.
Creditors have also attacked the city’s estimate for the size of the unfunded liability of Detroit’s two pension systems. The city claims the unfunded liability for 2014 is about $3.4 billion.
The higher the number, the more the city must set aside, leaving less for other creditors. In court yesterday, a lawyer for bondholders who could be almost wiped out by the city’s debt-adjustment plan questioned the number.
Pension consultant Alan Perry defended the city’s decision to use a conservative assumption for the amount the pension funds will earn in the future. The city assumes the funds will earn 6.75 percent on investments, less than most other large, public pension systems assume, Perry said.
Other public agencies have been slow to lower their assumptions, as consultants have recommended, Perry said. Lowering the estimate would force a public agency to choose between boosting its contribution to the pension or cutting benefits.
The case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).
Today's homepage Featured Art Video offers a vintage newsreel of the Detroit Institute of Arts opening in 1927. http://www.youtube.com/watch?v=3y3GFbM5MU0&sns=em