Bond insurer ups the ante in battle over the Detroit Institute of Arts
One group who stands to lose a lot in Detroit’s bankruptcy has upped the ante in the battle over the Detroit Institute of Arts.
The Financial Guaranty Insurance Corporation, a major bond insurer, has gone out and solicited bids for the museum’s assets.
And in papers filed in federal bankruptcy court Wednesday, FGIC said it’s received four tentative bids for the museum’s assets, or portions of them.
The bidders include:
■Catalyst Acquisitions/Bell Capital Partners at $1.75 billion “for the entire collection.”
■Art Capital Group at $2 billion. This would actually be in the form of a loan for $2 billion, with the art collection pledged as collateral.
■Yuan Management Hong Kong Limited at $895 million-$1.473 billion for 116 (unspecified) works.
■Beijing-based Poly International at “up to $1 billion” for the DIA’s Chinese art collection.
Wayne State University bankruptcy law professor Laura Bartell says this is all about making a point to one person--bankruptcy court judge Steven Rhodes.
Bartell says this is a ploy to show Judge Rhodes how much the art could be worth, because he must ultimately decide whether Detroit’s plan to emerge from bankruptcy is “fair and equitable” to each group of creditors.
“So what they’re arguing is that the plan is not fair and equitable when a liquidation of the DIA would result in a much higher return to the dissenting classes [of creditors],” Bartell says.
"They're obviously trying to encourage the judge to decline to confirm a plan of adjustment that does not provide for a sale of DIA assets."
But Bartell notes that many DIA pieces come with legal restrictions that prevent them from being sold. “You can’t just sell the whole collection,” she says. “It doesn’t work that way.”
A city also can’t be forced to sell assets in a municipal bankruptcy.
But FGIC argues that these offers prove that a proposed “grand bargain” to protect the DIA, while minimizing cuts to city pensions, is unfair to some creditors. That plan relies on more than $800 million in state and private funds to backstop the pension funds so DIA assets don’t have to go to the auction block.
But it faces a number of hurdles. The state needs to come through with its portion of the funds. Governor Snyder warned this week that pension funds need to reach a settlement with the city (and agree to take some cuts) before the legislature will work on that.
Judge Rhodes is the ultimate arbiter, since he’ll decide whether or not to approve any restructuring plan to allow the city to emerge from bankruptcy. A trial on the plan of adjustment--which is being revised as mediation talks between the city and creditors continue—is set for mid-July.