Despite orchestra truce, ills remain

The Philadelphia Orchestra Association's proposed labor truce with musicians may mark significant progress, but it is only one of several critical steps in the organization's long march toward exiting bankruptcy.

Significant battles threaten, and it still is not entirely clear what kind of an orchestra lies at the end of the process.

New legal chapters were proliferating at almost the exact moment Thursday that musicians were announcing reluctant approval of a severely concessionary four-year contract that outlines a 15 percent pay cut and steep reduction in the size of the fabled ensemble.

The Annenberg Foundation, the orchestra's largest donor, filed a limited objection to the orchestra's effort to obtain a $3.1 million loan to see it through the bankruptcy. The foundation is concerned about the orchestra's agreement with the lender, and is seeking protection of the money it has given to the orchestra - more than $50 million - so that it cannot be used for any other purpose than the orchestra activities specified by Annenberg.

The foundation may have the upper hand here, in no small part because it long ago reserved the right to revoke its gifts to the orchestra's endowment if the orchestra ever filed for bankruptcy. Such a withdrawal, of about $54 million, would devastate the orchestra's finances.

Simultaneously, the American Federation of Musicians and Employers' Pension Fund filed a similar objection in court.

More serious challenges may emerge. The deal with musicians is contingent on the Pension Benefit Guarantee Corp., a federal agency, agreeing to a "distress termination" of the current defined-benefit pension plan.

PBGC spokesman Jeffrey Speicher said the agency would formulate a legal response to the proposed contract.

"PBGC's primary mission is to protect pension plans. We always work with employers to keep their pension promises. But if they can't, we don't force them to keep pensions they can't afford. We will review the agreement and the orchestra's financial condition. We will then advise the bankruptcy court if ending the pension plan is justified."

The PBGC flexed its muscle in a similar case last week, announcing that it would fight Friendly Ice Cream Corp.'s efforts to shed pension obligations through the bankruptcy process.