Defaulting Folk Art Museum Says It Won’t Sell Works to Pay Debt
The American Folk Art Museum won’t sell its collection to pay interest on $31.9 million it borrowed to construct a new building, after defaulting on payments in July 2009, the institution’s director said.
The museum, down the block from the Museum of Modern Art, will sell art only “to purchase for the collection,” Executive Director Maria Ann Conelli said in an interview, adding that she expects to have a balanced budget for the fiscal year ending June 30. “We’ve been hitting our target every single month.”
The Manhattan institution has missed a total of $3.7 million in payments to a debt service fund for the new premises, a Jan. 5 filing to bondholders said. Total missed payments are up by about $2 million in the past year -- averaging $7,700 each weekday.
Acclaimed exhibits -- such as “Women Only: Folk Art by Female Hands” featuring paintings, drawings and quilts -- failed to attract the attendance and revenue levels projected in 2000. Last month’s filing said the museum doesn’t expect to make payments into the fund “for the foreseeable future.”
“We are planning our way out of this,” said Conelli, declining to elaborate.
Holders of the tax-exempt bonds -- issued a decade ago by the New York City Trust for Cultural Resources, a public benefit body -- have been paid on time. Insurer ACA Financial Guarantee Corp. recently deposited $853,425 into the fund, according to the filing, enabling bondholders to be paid interest due last month. An ACA spokesman declined to comment.
Financial headaches at the museum date back at least to the early 1970s. With the museum short of funds, “the financial strain on the institution was intense,” according to a 2001 essay by former director Gerard C. Wertkin.
It then considered selling its collection at auction and eventually kept its most important works and sold less significant ones.
“The controversy focused attention on the needs of the institution, and generous friends rallied to the cause,” Wertkin wrote.
While patron and Chairman Emeritus Ralph Esmerian recently hit tough times -- the jeweler was charged in November with bank fraud and other crimes -- the museum has other prominent fans. Laura Parsons, wife of Citigroup Inc. Chairman Richard Parsons, is president of the board.
Conelli said she’s been in touch with Alice Walton, the Wal-Mart Stores Inc. heiress and American art collector.
“I am always in conversation with potential donors,” she said. “I had the pleasure of taking her through the museum several times.”
Walton didn’t return a call seeking comment.
A forbearance agreement with ACA expires on June 30, a week after the museum turns 50. In the filing, the museum said it intends to “resolve the situation created by its inability to service the bonds” by cooperating with ACA and “other parties in interest.”
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