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Crystal Cathedral Enters Bankruptcy, Blames Recession

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Oct. 19 (Bloomberg) -- Crystal Cathedral Ministries, the Southern California megachurch founded by television evangelist Robert Schuller, filed for bankruptcy court protection from its creditors owed as much as $100 million.

The church, known for its television show “The Hour of Power,” listed assets and debts of $50 million to $100 million each in Chapter 11 documents filed yesterday in U.S. Bankruptcy Court in Santa Ana, California. The church, based in Garden Grove, claims a congregation of 10,000 members.

“Budgets could not be cut fast enough to keep up with the unprecedented rapid decline in revenue due to the recession,” Senior Pastor Sheila Schuller Coleman said in a statement.

U.S. churches are struggling financially because high unemployment has cut weekly offerings, said Wayne Bradshaw, president and chief operating officer of Broadway Federal Bank. The Los Angeles-based lender does about 25 percent of its lending business with churches.

Broadway, with about $510 million in assets, has made about $100 million in loans to churches, Bradshaw said. The church-related loans have a higher rate of late payments than Broadway’s other loans, he said.

“We’re seeing more late payments,” Bradshaw said in a phone interview. “There certainly has been increasing delinquencies.”

Revenue Down 40%

A Crystal Cathedral spokesman, John Charles, said in an interview the church’s revenue fell about 40 percent this year. From 2008 to 2009, revenue fell from about $30 million to about $22 million, or 27 percent, he said.

In November 2008, Robert Anthony Schuller, son of the founder, resigned from Crystal Cathedral and later started his own television ministry.

Megachurches that rely on donations from television viewers can see a drop in revenue when there is a change in leadership, said Dan Busby, president of the Evangelical Council for Financial Accountability. The council sets accounting standards for its 1,500 member nonprofits.

“When you are going through leadership transition, it’s very likely that can impact a television ministry that relies on personalities,” Busby said in an interview.

Busby said that it is unusual for any church, particularly a high-profile megachurch, to file for bankruptcy. A megachurch is one that has more than 2,000 regular members, he said.

To counter its revenue declines, Crystal Cathedral sold a 170-acre retreat, cut staff and canceled its “Glory of Easter” program.

Church’s Creditors

One of the vendors that provided the animals for that service is among the church’s creditors, along with television stations and a supplier of high-definition TV equipment, Charles said.

The church decided to file for bankruptcy after some creditors sued for payment, according to the statement. The board of directors on Aug. 27 authorized a bankruptcy filing by Chief Financial Officer Fred W. Southard, according to court papers.

Robert Schuller cited the title of his 1984 book -- “Tough Times Never Last, But Tough People Do!” -- as he forecast in the statement that the church will overcome its financial difficulties. Its operations, including the television show, will continue while Crystal Cathedral tries to reorganize and reduce its debts, the church said.

Schuller retired from daily oversight of the church earlier this year. He was succeeded by his daughter, Schuller Coleman.

The Crystal Cathedral is a glass-enclosed building designed to double as a television studio to broadcast the Sunday worship services. Its 145-foot-wide chancel area can hold 1,000 singers, and the church organ contains 16,000 pipes.

The entranceway contains two 90-foot doors, and the altar is dominated by a 17-foot wooden cross decorated with gold leaf.

The case is 10-24771, U.S. Bankruptcy Court, Central District of California (Santa Ana).

To contact the reporters on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.

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