Philadelphia Orchestra, With $116 Million, Files for Bankruptcy
Former Philadelphia Orchestra conductor Eugene Ormandy in 1966. (Photo by Erich Auerbach/Getty Images)
The Philadelphia Orchestra, which made mushrooms and hippos dance in Walt Disney Co.’s animated “Fantasia” and premiered works by Stravinsky, Mahler and Rachmaninoff, filed for bankruptcy protection over the weekend.
The Fabulous Philadelphians, as they’re called on better days, opted for Chapter 11 reorganization under the U.S. bankruptcy code because otherwise they would’ve run out of cash by May, Philadelphia Orchestra Association Chairman Richard B. Worley said in court papers. Remaining performances this season will go on as scheduled, the orchestra said in an e-mailed statement.
The orchestra had endowments valued at $116 million as of Feb. 28, said Worley, the managing director of Permit Capital LLC, a Conshohocken, Pennsylvania, investment-management firm. The orchestra isn’t permitted to spend the funds on general operating expenses because these are restricted to specific uses, such as musician salaries and education, he said.
The U.S. Bankruptcy Court filing in Philadelphia comes as many classical music and opera companies struggle with sagging attendance and donations. Earlier this month, musicians at the Detroit Symphony Orchestra wrapped up a six-month strike. The Baltimore Opera closed in 2009 and New York City Opera projects a deficit for its fourth consecutive season.
“It’s sad,” said Jeffrey Kallberg, an associate dean and professor of music history at the University of Pennsylvania who’s lectured before concerts at the Philadelphia Orchestra. “It stands as a culminating moment” following the orchestra’s money woes, he said.
Top-Notch
While the 111-year-old symphony orchestra hasn’t been as successful in attracting young audiences as the Los Angeles Philharmonic and others, Kallberg regards it as top-notch.
“On good nights, the playing is just splendid,” he said.
Ticket sales, donations and endowment income declined in recent years, Worley said in the filing, as expenses, including pension obligations, swelled. The orchestra projected a deficit this season of $14.5 million, double that of a year ago. Assets held by the orchestra to pay pensions are an estimated $44.8 million below what’s needed, he said.
The orchestra seeks relief through the bankruptcy court from pension obligations and from its long-term lease with the Kimmel Center for the Performing Arts, where it performs, Worley said in the filing. It also seeks a new agreement with the union representing its 102 musicians. Their contract expires in September. An orchestra spokeswoman said Worley wasn’t available for comment yesterday.
The five musicians on the orchestra board opposed bankruptcy, said John Koen, a cellist and chairman of the board’s musicians’ committee.
Endowment Lifeline
The orchestra spent unrestricted endowment funds to plug deficits in the past, according to court papers. Koen said lawyers for his union, Local 77 of the American Federation of Musicians, advised that the orchestra has leeway to dip into restricted endowments -- instead of filing for bankruptcy.
He added that management overstated the pension shortfall.
“I think the board made a decision based on faulty information,” Koen said in an interview.
Musicians’ pension for those at the orchestra for 30 years is as much as $80,000 annually, the most generous in the U.S. for an orchestra, he said. He added that bankruptcy creates uncertainty that leaves the orchestra vulnerable to poaching of players by other symphonies.
“I have trouble being optimistic about the future of the organization,” he said.
Companies use Chapter 11 of the bankruptcy code to reorganize, cut debt and continue operating. The orchestra has no long-term debt, it said in its statement.
The case is In Re The Philadelphia Orchestra Association, 11-13098, U.S. Bankruptcy Court, Eastern District of Pennsylvania (Philadelphia).
To contact the writer on this story: Philip Boroff in New York at pboroff@bloomberg.net.
To contact the editor responsible for this story: Manuela Hoelterhoff at mhoelterhoff@bloomberg.net.
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