Kevyn Orr Has Let It Hit The Fan [[Threatens to Sell DIA Artwork)

**313WX** · May-23-13, 10:46 PM

http://www.freep.com/article/2013052...bankruptcy-art

**313WX** · May-23-13, 10:53 PM

It's kind of funny seeing the reaction from folks across Michigan now that he's made this announcement. Surely everyone besides the so-called rabble rousers at the City Council meetings saw this coming when they insisted Detroit get an EM.

**canuck** · May-23-13, 11:02 PM

This may actually open the door to a type of regional merger since these so-called assets must remain in the public domain. The metropolitan fiber may be in a nascent stage with this looming threat.

**EastsideAl** · May-23-13, 11:44 PM

Where's that goofy "leverage the value of the DIA's collection" guy when you need him?

**michimoby** · May-23-13, 11:53 PM

Originally Posted by 313WX

http://www.freep.com/article/2013052...bankruptcy-art

It seems pretty clear that Orr sees this as a complete last resort. It's akin to the guy that filed bankruptcy but needs to give up his cherry Corvette to balance the books: of course it's a horrible situation, but the creditors are fickle.

**Zacha341** · May-24-13, 03:58 AM

Oh "Coesession" or something...? Yep. He was all over the web for a while on that, here, freep, detroit news etc. Perhaps he moved on to a greater cause...

...

Originally Posted by EastsideAl

Where's that goofy "leverage the value of the DIA's collection" guy when you need him?

**Lowell** · May-24-13, 08:13 AM

Kevyn Orr would go down as the greatest scrapper in Detroit history if he allowed that to happen. If he wants to get attention, he has squarely hit the donkey between the eyes with a 2 by 4.

I can hear this argument arising.

Hey I'm a little guy homeowner in Detroit, I've seen my city services and home value decline, crime go on unabated and my insurance rise. We've paid all we can and we have to take care of all the poor people who can't afford to live anywhere else in the metro. Why not sell something that is primarily used by people from elsewhere in the metro?

What's wrong with that argument?

Maybe this will get to the real issue - metropolitan sharing -- of the good and the bad.

**bailey** · May-24-13, 08:14 AM

Originally Posted by michimoby

It seems pretty clear that Orr sees this as a complete last resort. It's akin to the guy that filed bankruptcy but needs to give up his cherry Corvette to balance the books: of course it's a horrible situation, but the creditors are fickle.

Yeah, those crazy, 'fickle' creditors.....wanting to be paid back the money they loaned and everything. How rude.
If you're going to go BK, you don't get to keep the Ferrari and tell the bank to take a haircut. It's just not how it works.

Would it destroy the DIA? absolutely. No one would donate anything other than a paint by numbers their kid did... but that doesn't mean the asset is somehow beyond reach.

**Lowell** · May-24-13, 08:21 AM

There is a gold mine of art there that rising museums, emerging third world billionaires and collections would love to have a shot at.

A bankruptcy sell off would be extremely complex and I notice the DIA has hired a bankruptcy lawyer to advise them. Al Taubman has chimed in with his opposition somewhat ironically describing such an event as a crime. But he is signaling that big money will oppose such a move. So Orr has their attention too.

**jt1** · May-24-13, 08:25 AM

Originally Posted by bailey

Yeah, those crazy, 'fickle' creditors.....wanting to be paid back the money they loaned and everything. How rude.
If you're going to go BK, you don't get to keep the Ferrari and tell the bank to take a haircut. It's just not how it works.

Would it destroy the DIA? absolutely. No one would donate anything other than a paint by numbers their kid did... but that doesn't mean the asset is somehow beyond reach.

Bear in mind that those bondholders are getting great rates on bonds due to the horrible ratings due to the city's finances.

I have issues with the belief that bondholders should not take a loss since they knowingly bought junk bonds. They are essentially saying we should get a higher rate due to risk but we really aren't willing to assume that risk

**dmike76** · May-24-13, 08:38 AM

The title of this thread is misleading. He didn't threaten anything. He is considering it. Orr has to explore all options and be realistic about the situation, unlike all Detroit elected officials over the last fifty years. Let's all calm down. They haven't set up a yard sale out in front of the DIA and they aren't pulling art off the walls.

**townonenorth** · May-24-13, 08:41 AM

Originally Posted by Zacha341

Oh "Coesession" or something...? Yep. He was all over the web for a while on that, here, freep, detroit news etc. Perhaps he moved on to a greater cause...

...

Yes, he's all over the Freep pages under his real name.

**poobert** · May-24-13, 08:42 AM

So why doesn't the city just transfer ownership of the collection to the DIA? Then it is out of the reach of creditors, n'est pas?

I can't see what business a city - let alone a bankrupt, godforsaken hellhole of a city run by fucking idiots - has owning a world-class art collection in the first place. It seems that the only purpose that serves is the danger of it getting sold off.

A la Vietnam, we had to burn the village in order to save it?

**Johnnny5** · May-24-13, 08:50 AM

I brought this up in the other Orr thread and some of the responses were "Get real" and "Never gonna happen". The city can't claim to be flat broke and refuse to honor contracts and commitments when it's holding billions of dollars in artwork. The DIA holdings are going to be on the table sometime during this process, it's just a matter of when.

**Hermod** · May-24-13, 09:20 AM

Originally Posted by Zacha341

Oh "Coesession" or something...? Yep. He was all over the web for a while on that, here, freep, detroit news etc. Perhaps he moved on to a greater cause...

...

I think that he sees some really great commissions in return for brokering the deals.

**Honky Tonk** · May-24-13, 09:45 AM

Originally Posted by poobert

So why doesn't the city just transfer ownership of the collection to the DIA? Then it is out of the reach of creditors, n'est pas?

I can't see what business a city - let alone a bankrupt, godforsaken hellhole of a city run by fucking idiots - has owning a world-class art collection in the first place. It seems that the only purpose that serves is the danger of it getting sold off.

A la Vietnam, we had to burn the village in order to save it?

Why ask questions when you answer them yourself?

**samsonov** · May-24-13, 09:59 AM

Originally Posted by poobert

So why doesn't the city just transfer ownership of the collection to the DIA? Then it is out of the reach of creditors, n'est pas?

As far as I know, if you're contemplating a bankruptcy you're not allowed to transfer ownership of assets so that they're out of the reach of creditors. Those are the rules for personal bankruptcies anyway, not sure if they apply to municipal bankruptcies.

**corktownyuppie** · May-24-13, 10:46 AM

Originally Posted by Johnnny5

I brought this up in the other Orr thread and some of the responses were "Get real" and "Never gonna happen". The city can't claim to be flat broke and refuse to honor contracts and commitments when it's holding billions of dollars in artwork. The DIA holdings are going to be on the table sometime during this process, it's just a matter of when.

Detroit [[the region, not the City of) is not going to lose this artwork. It will be on the table, for sure, but it's not just a mattero when, but also a matter of how. Detroit, the city, may lose "ownership" of the art.

I have a feeling the scenario looks like this: The State [[or some other regional entity created with state backing) might have to end up purchasing the artwork from the City. The state [[with its credit rating) could issue some really long-term bonds paying pretty low interest using the artwork as collateral. The DIA museum might have to add the interest cost as "rent" that it pays to the entity. This interest cost would then result in higher operating expenses [[but not by too much). This extra expense might need to be made up via capital campaign, increased endowment, etc.

But I don't believe any of that art work is leaving the DIA when all the dust settles. Who "owns" it, and how that "ownership" is paid for will be an interesting question.

**daddeeo** · May-24-13, 11:31 AM

If this happened, Orr would be no better than a scrapper going into a house and stealing all the copper wiring. You might as well not have a city if you're going to go this route.

**brizee** · May-24-13, 11:42 AM

Originally Posted by 313WX

It's kind of funny seeing the reaction from folks across Michigan now that he's made this announcement. Surely everyone besides the so-called rabble rousers at the City Council meetings saw this coming when they insisted Detroit get an EM.

I do find that the most entertaining point in all of this.

I have no clue how the legalities of any of this work and not particularly interested [[law is boring as shit, that's why my sister is the lawyer). But it is interesting watching the commentary of so many who handwaved the disenfranchisment of city voters get their panties in a bunch over this.

**313WX** · May-24-13, 11:45 AM

Originally Posted by corktownyuppie

Detroit [[the region, not the City of) is not going to lose this artwork. It will be on the table, for sure, but it's not just a mattero when, but also a matter of how. Detroit, the city, may lose "ownership" of the art.

I have a feeling the scenario looks like this: The State [[or some other regional entity created with state backing) might have to end up purchasing the artwork from the City. The state [[with its credit rating) could issue some really long-term bonds paying pretty low interest using the artwork as collateral. The DIA museum might have to add the interest cost as "rent" that it pays to the entity. This interest cost would then result in higher operating expenses [[but not by too much). This extra expense might need to be made up via capital campaign, increased endowment, etc.

But I don't believe any of that art work is leaving the DIA when all the dust settles. Who "owns" it, and how that "ownership" is paid for will be an interesting question.

But the thing is he wants to use the artwork to pay of the city already accrued, not use as negotiation for additional bonds [[or maybe I'm misunderstanding what you're saying).

And couldn't the city do that on its own once the already accrued debt is restructured?

**bailey** · May-24-13, 12:01 PM

Originally Posted by jt1

Bear in mind that those bondholders are getting great rates on bonds due to the horrible ratings due to the city's finances.

I have issues with the belief that bondholders should not take a loss since they knowingly bought junk bonds. They are essentially saying we should get a higher rate due to risk but we really aren't willing to assume that risk

They are going to take a loss. It's not like a hypothetical sale of all the art would even come close to the outstanding obligations. I don't personally think it would ever happen because the city image would never recover and no person, foundation, or buisness would ever contribute a dime to any municiple entity again. I would imagine this is a warning shot across the bow of those that think a bankruptcy is a preferable option to working with the EFM. Orr is just letting everyone know what the nuclear option is going to look like.

**jt1** · May-24-13, 12:08 PM

Originally Posted by bailey

They are going to take a loss. It's not like a hypothetical sale of all the art would even come close to the outstanding obligations. I don't personally think it would ever happen because the city image would never recover and no person, foundation, or buisness would ever contribute a dime to any municiple entity again. I would imagine this is a warning shot across the bow of those that think a bankruptcy is a preferable option to working with the EFM. Orr is just letting everyone know what the nuclear option is going to look like.

I get that, just my concern is that people seem to discuss the bondholders like all bonds and bondholders are created equal which simply isn't the case.

I would hope that someone that holds junk status bonds wouldn't realistically expect to get the same amount as someone holding A rated bonds. That however is the impression I get. People involved in this process, the bondholders and media need to be clear that they bought junk rated bonds so they were assuming the high risk for a higher rate.

If that gets lost with the EM or a bk court then it would be a complete travesty. Bondholders, especially those buying junk bondds, should not be immune to taking a large hit.

**Johnnny5** · May-24-13, 12:41 PM

Originally Posted by bailey

I don't personally think it would ever happen because the city image would never recover and no person, foundation, or buisness would ever contribute a dime to any municiple entity again.

Yeah, because the sale of some artwork would really sting Detroit's image. I'm sure that's what going to put the nail in the coffin, not the fact that Detroit has over 10k abandoned homes, averages a murder per day and has 4 out of the top 10 most violent neighborhoods in the U.S.

Most people outside of Detroit didn't give a shit that Detroit had to close fire and police stations, they didn't care that Detroiter's don't know if someone will show up when 911 is called and that people are dying because of it. They hardly cared about any of this, but God forbid someone even suggest that they may have to sell some city owned paintings that most of the Detroit's residents have never even seen or heard of before.

**mwilbert** · May-24-13, 12:46 PM

The ratings of the bonds has no legal impact on how much the bondholders are entitled to recover. Doesn't matter if they are AAA [[pristine) or CCC [[bad junk). What matters is what the bonds are secured by and what other obligations are senior to them. That in turn affects what rating the bonds may receive.