Orchestra's final exit from bankruptcy

Posted: August 01, 2012

The Philadelphia Orchestra Association is out of bankruptcy.

U.S. Bankruptcy Judge Eric L. Frank approved the association's reorganization plan June 28, but with the writing of checks and completion of other administrative matters Monday and Tuesday, the curtain officially came down on perhaps the most perilous episode in the history of the organization that supports and presents the storied ensemble.

"I feel like I'm getting out of jail," said orchestra chairman Richard B. Worley. "There were times when it seemed overwhelming and fraught with danger. But the constituents within the institution, the musicians and staff, made adjustments, contributions. The Kimmel Center was enormously supportive and helpful. And many Philadelphians came to our aid. I am both proud and grateful to all those who helped save this wonderful, living, breathing treasure. There is still a lot of work to do. But we accomplished what we could, and that was a lot."

Asked whether he still thought bankruptcy was the right route, he said, "I do. Emphatically. I understand there are others who would disagree with that assessment. It's over and done. And I hope the community will rally around the orchestra. I think it's a time of great opportunity."

When it filed its Chapter 11 petition in April 2011, the Philadelphia Orchestra became the first major U.S. orchestra to declare bankruptcy. The case took longer (15½ months) and was more expensive (almost $10 million in professional fees and expenses) than expected.

The association succeeded in most of what it set out to do, though the action was not without substantial risk and high costs. A deeply concessionary labor deal with musicians was reached despite the threat of a strike. Several musicians have left or are planning to leave for other jobs.

The association was able to withdraw from a national musicians' pension fund and shift its burden to the federal agency that insures pensions by negotiating a $1.75 million settlement with the pension fund, avoiding potentially lengthy litigation.

A merger-in-process with the Philly Pops was ended after a $1.25 million settlement payment from the association to the Pops was agreed upon.

Talks with the Kimmel Center produced rent concessions for the orchestra's use of Verizon Hall.

Bankruptcy triggered a revamped contract with the Annenberg Foundation giving the philanthropy greater oversight and control over how investment income from its $50 million gift would be spent. The money is being moved from the orchestra endowment into an account at Northern Trust.

Although the bankruptcy - official as of Monday - is now behind the association, a few issues linger.

The mechanics of separating the Annenberg money from the orchestra's and transferring it is taking longer than expected, so the association filed a motion Monday to extend to Aug. 31 the time for implementing the new agreement.

"These are invested funds, and some are complicated and some overlap with other parts of the orchestra's endowment," said orchestra lawyer Lawrence G. McMichael. "Some are nontransferable by their nature. This is quite a list of complications we're dealing with."

Litigation continues against a South Korean presenter that failed to make good on payments for two concerts in April 2010. Of $200,000, only $20,000 has been paid.

In addition, a Sept. 24 hearing will consider some of the 85 claims by creditors being contested by the association. "Many of these claims have in fact been paid," as in the case of some guest artists, "or are duplicates," said McMichael, who expects many to be resolved before the hearing date. Several were made by subscribers for tickets to concerts that happened, so they are not entitled to a payment, McMichael said; some are for claim amounts that differ from those in the association's records.

At the June hearing approving its reorganization plan, Frank said, "The orchestra is an important cultural and civic institution, and any Chapter 11 case comes with the risk of failure. Had that occurred, it would have been a great loss for Philadelphia, the region, and the music world."

He expressed his hope that the reorganization would allow the orchestra to "continue to perform for audiences for many years to come."


Contact Peter Dobrin

at 215-854-5611 or pdobrin@phillynews.com.

Read his blog at www.philly.com/artswatch.

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