Orr Rows DIA to Safety
Detroit -- The expert in charge of freeing the city from bankruptcy rejects a proposal to raise as much as $2 billion for the city by selling its art collection or using it to secure a loan. However, creditors still want to monetarize the city's art.
Art collectors of ArtKabinett social media network know that only the bankruptcy court has the final say in liquidating the amazing collection of the Detroit Institute of Arts.
Several creditors are still looking to get their hands on the city's art holdings. Bond insurers and a public workers union Tuesday presented four potential offers to convert the Picassos, Van Goghs and other works at the Detroit Institute of Arts into cash.
One possible bidder is a Chinese auction house, according to court filings.
Kevyn Orr, a bankruptcy expert who was appointed last year to help Michigan’s biggest city adjust $18 billion in debt, said an art deal wasn’t on the table.
“You sell any art and you’re impacting the quality of life of the city,” Orr said in an interview this week. “Just like New York didn’t have to build co-ops in Central Park when it was going through its troubles, Detroit should not have to denude itself.”
Detroit filed the biggest-ever U.S. municipal bankruptcy in July, saying it couldn’t meet financial obligations and still provide essential services. Since then, the city and creditors including bond insurers, public pension systems and unions have been negotiating over cuts.
Court mediators have already forged a deal with private art foundations to donate $816 million to the pension funds. In return, the city’s art collection would be placed in a trust and shielded from a forced sale to pay creditors.
Orr, a former partner at the Jones Day law firm, which is representing the city in bankruptcy, can be removed as emergency manager by the city council in September. He has said Detroit could be out of bankruptcy by October.
Financial Guaranty Insurance Co., Syncora Guarantee Inc. and Council 25 were among the creditors who asked the bankruptcy judge, Steven Rhodes, to force the city to cooperate with bidders seeking to acquire Detroit’s art.
The possible bidders include Catalyst Acquisitions LLC/Marc Bell Capital Partners LLC, Art Capital Group LLC, Poly International Auction Co. and Yuan Management Hong Kong Ltd., according to the filing.
Months ago, Christie’s issued a preliminary report saying part of the DIA collection was worth as much as $867 million. Naturally, the museum has opposed any 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.
At least one of the potential bidders said its plan would keep the art in the city.
Art in Hock
Art Capital Group, emailed a proposal to lend the city $2 billion backed by the collection to allow “the people and community of Detroit to keep its treasured art assets."
Orr said securitizing the art would put the city “in hock” when the goal of the bankruptcy is to reduce long-term debt.
Poly International, an auction house owned by China’s government, seeks to buy all the Chinese works in the collection for as much as $1 billion, according to court filings.
Another bidder, Yuan, said it would like to buy 116 works for as much as $1.47 billion “on behalf off certain investment funds,” and Catalyst said it may be interested in paying as much as $1.75 billion for the entire collection.
The creditors called the potential offers “preliminary indications of interest.” Before the companies can make binding bids, they must have the chance to inspect the pieces they are interested in and study related documentation, according to yesterday’s filing.
This is the second time creditors have asked the judge to force the city to cooperate with an independent assessment of the collection. The previous motion didn’t include any offers.
Creditors argue that the city can’t win approval for a plan to adjust Detroit’s debt without considering selling the art.
The case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).