The Free Press, Mankato, MN

State, national news

December 16, 2013

Detroit awaits direction on options to art sale

(Continued)

Citing debt of at least $18 billion, as well as rising pension and health care costs and a revenue stream too small to pay the city's bills, Orr filed for bankruptcy in July. A federal judge on Dec. 3 allowed Detroit to become the largest U.S. city to enter bankruptcy.

Orr is expected to present a plan of adjustment for fiscal restructuring to the court in early January that will include his recommendations for the art.

"Everything is on the table," Orr told The Associated Press on Thursday. "If there's money in hand, then we'll re-address what's on the table. If there's a proposal, it is very welcome. We hope it comes to fruition. We hope it is significant, and that perhaps will change the discussion.

"But right now I don't want to mislead anyone: Cash is king. Until I have cash in hand, or a firm proposal or a definitive agreement everything is on the table."

Even selling off the entire city-owned collection may not be enough. Christie's has determined the fair market value of all the city-owned pieces is between $452 million to $866 million. Detroit's two employee pension funds are short $3.5 billion, according to Orr.

Christie's alternatives to selling the art include using it as collateral to secure loans or lines of credit and creating a partnership with another museum where the art would be leased out on a long-term basis.

The auction house also said the city could establish a trust from which U.S. museums "rent" the city-owned art. Minority interests would be sold to individual museums. Revenue from the sale of these shares would be paid to Detroit.

"They all seem like feasible alternatives to an outright sale, assuming of course that there are counterparties willing to engage in the outlined transaction and that the monetary return from the transaction is not so significantly less than the monetary return from an outright sale that all creditors rebel," said John Monaghan, a partner in Boston's Holland & Knight law firm.

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