CofD Bond Holders Say they have bids for up to $2B for DIA Collection.

[Lowell]

Hold on say the bond holders who are looking at a 15 cents on the dollar haircuts. We have offers that top yours.

In December, Christie’s estimated the fair market value of the city-purchased art at the DIA at $454 million to $867 million.

I think there are few that don't think that was low-balled and it appears the creditors ran their own 'what if' auction.

Detroit bankruptcy creditors, led by Financial Guaranty Insurance Co., have lined up four tentative bids of as high as $2 billion to purchase all or parts of the Detroit Institute of Arts collection.
...
Three firms made bids to purchase all or part of the collection. Another offered exit financing to the city, secured by the art collection.

The firms and their bids are:

• Catalyst Acquisitions LLC/Marc Bell Capital Partners LLC, which submitted a nonbinding indication of interest in purchasing the entire art collection for $1.75 billion
• Art Capital Group LLC, which submitted a nonbinding term sheet, offering to provide the city with an exit facility of up to $2 billion, secured by the entire art collection.
• Poly International Auction Co. Ltd. which, on behalf of a client, submitted a nonbinding indication of interest in purchasing all Chinese works in the collection for up to $1 billion.
• Yuan Management Hong Kong Ltd., which on behalf of certain investment funds submitted a nonbinding indication of interest in purchasing 116 pieces or 0.2 percent of the 65,000 pieces at the museum for $895 million to $1.473 billion.

From Crain's Currently behind Paywall but usually released later

[jt1]

Hold on say the bond holders who are looking at a 15 cents on the dollar haircuts. We have offers that top yours.

In December, Christie’s estimated the fair market value of the city-purchased art at the DIA at $454 million to $867 million.

I think there are few that don't think that was low-balled and it appears the creditors ran their own 'what if' auction.



From Crain's Currently behind Paywall but usually released later

And it assumes that the entire collection may be for sale. This is nothing more than an attempt for them to try to force the city which items have covenants that does not allow them to be sold.

Pretty much a fishing expedition for more information. Just as importantly is these are 'offers.' I can submit an offer of $10B for all the art but it doesn't mean it would actually come to fruition.

Either way, Rosen will bounce this and hopefully point out the pretentiousness of this action.

[MikeyinBrooklyn]

I hope and pray the DIA collection stays intact and where it is. But, when you own things and owe people money, it is reasonable, if awful, to be expected to sell your things to pay those debts. As I wrote here before, if you as an individual are mortgaged beyond your ability to pay, you do not have a legal right to deem your family heirlooms off-limits to your creditors. If some person or entity owed me money, especially a huge amount of money, I would go to court to liquidate all possible assets to get paid. Doubly so if I had a legal responsibility to guard other people's assets. The horrible action here is not by those trying to collect the money owed; it is by those who chalked up the debt in the first place, and that specifically includes the voters who willfully elected demonstrably irresponsible people to office. I hope Detroit didn't screw Detroit out of a first rate art museum.

[jt1]

I hope and pray the DIA collection stays intact and where it is. But, when you own things and owe people money, it is reasonable, if awful, to be expected to sell your things to pay those debts. As I wrote here before, if you as an individual are mortgaged beyond your ability to pay, you do not have a legal right to deem your family heirlooms off-limits to your creditors. If some person or entity owed me money, especially a huge amount of money, I would go to court to liquidate all possible assets to get paid. Doubly so if I had a legal responsibility to guard other people's assets. The horrible action here is not by those trying to collect the money owed; it is by those who chalked up the debt in the first place, and that specifically includes the voters who willfully elected demonstrably irresponsible people to office. I hope Detroit didn't screw Detroit out of a first rate art museum.

There is a very large difference between this BK and a personal BK. Chapter 9 is not a full liquidation and Judge Rhodes has made it clear that one time sell offs are not the solution.

There are different types of Bankruptcy even at a personal level. There are personal BKs that do not force people to liquidate all assets:

Chapter 7 is a full liquidation. Everything you have must be sold off [[I believe there may be a few exclusions)
Chapter 13 is not a liquidation and requires a trustee to manage debts and the BK filer must pay the trustee who distributes payment to creditors

It is really annoying that people can't understand that this is not a liquidation.

[MikeyinBrooklyn]

I am not referring to bankruptcy law, of which I do not know specifics. I am just pointing out that it would suck to have somebody owe you money and be unwilling to sell their nice art to pay you. I don't feel bad for large financial institutions who were aware- as was everyone else involved, including Detroit officials and union leadership- that Detroit could not ever conceivably pay off all the debt and obligations accrued lo the last many decades. I do feel bad for the individuals who invested in such institutions and their financial products, who will get a very small share of the money to which they were contractually entitled. I can't imagine the anger I would have if I did not have my own money for my retirement, while the city which owed the money didn't have to liquidate their art to pay me. As I said before, I don't want to liquidate the DIA. But at the same time, it seems morally wrong to screw people when you could sell the art and pay them. Art isn't police protection or bus service. It's a luxury. We can keep our luxury while f'ing those we owe money? That's just so wrong.

[BankruptcyGuy]

The bondholders have submitted these "offers" for property that is not for sale, and for which the court cannot order sale, in order to attempt to bolster their argument to the court that the plan is unfair. I really don't think that a plan, if supported by the CoD, pensioners and some but not all bondholders, will be held up for the holdouts, no matter how much the art is worth.

I'll repeat for the sake of clarity: under no circumstances can the Bankruptcy Court order the sale of art. It is outside of the scope of powers of this [[and any federal) court.

Municipal bankruptcies always have that challenge--generally, there are always some assets held by the public. [[parks, roads, etc.)

[motz]

"You made a shitty investment, you should have to pay for that shitty investment, free market, etc. Go suck on an egg" -Any rational person

[corktownyuppie]

I am not referring to bankruptcy law, of which I do not know specifics. I am just pointing out that it would suck to have somebody owe you money and be unwilling to sell their nice art to pay you. I don't feel bad for large financial institutions who were aware- as was everyone else involved, including Detroit officials and union leadership- that Detroit could not ever conceivably pay off all the debt and obligations accrued lo the last many decades. I do feel bad for the individuals who invested in such institutions and their financial products, who will get a very small share of the money to which they were contractually entitled. I can't imagine the anger I would have if I did not have my own money for my retirement, while the city which owed the money didn't have to liquidate their art to pay me. As I said before, I don't want to liquidate the DIA.

Municipal law is somewhat strange in that rather than prioritizing the creditors over the city, it's the city that is prioritized over the creditors. If it weren't, NYC would have been forced to sell Central Park to the highest bidder.

Now just because the city is 1st in line, the court still needs to be fair-minded in balancing the city's needs against creditors. What is fair-minded? Well, it sounds like you and Rhodes may have a fundamental disagreement there.

You're talking about how art is a luxury, so far at the top of Maslow's Hierarchy of Needs...while pensioners are barely covering the basics at the bottom of the needs ladder. You have a point, which is why Rhodes/Rosen are pushing very hard to find some way to extract a monetary value out of them, either by lease or in the case of the current proposal -- by litigatory settlement.

But the Court said early on and in no uncertain terms that the line is drawn at the irreversible process of liquidation. Leasing out the art to the L'ouvre for 6 months? Sure. But outright selling it for cash? No. Belle Isle was leased to the state for 30 years. But there's no way Rhodes would have approved a sale to the developers to turn it into a tax-free Commonwealth.

It's really unfortunate, but art is not something that monetizes easily. It's not like casino revenue which comes in every month, or the Ambassador Bridge which has some monthly stream of revenue. Art is...well, art.

But at the same time, it seems morally wrong to screw people when you could sell the art and pay them. Art isn't police protection or bus service. It's a luxury. We can keep our luxury while f'ing those we owe money? That's just so wrong.

The problem is that it's not clear that the art can even be sold. Reversion clauses, title restrictions, the whole thing would drag out for years.

I would have no problem with renting out the art. If one of these investors willing to pay $2 Billion for the art work is interested in paying 5% of that... $100 Million per year for the exclusive right to display that artwork 3-6 months out of the year, so be it. We can rotate the art in and out and it could still be used for the public good.

But, like Rosen, I draw the line at liquidation. We're not selling Belle Isle. Hell, we could probably just turn it into a Detroit-owned country club and charge people a $1000 per year membership fee and get far more monetization of it. But, we can't sell it. Same with Cobo. Same with Campus Martius. Same with the Riverfront.

And same with the art.

[rb336]

The problem is that it's not clear that the art can even be sold. Reversion clauses, title restrictions, the whole thing would drag out for years.

Even though the city owns the DIA, and even though some of the art was bought with DIA funds, I think the only art that can realistically be touched is art that was bought out of the city's funds. Art purchased with donated funds or funds from grants is a huge ball of wax that the court clearly doesn't want to get into

[EastsideAl]

I worked with one of the companies named above, and they were fraudsters of the first order who promised money that they never had any intention of paying, and then started to renegotiate the terms after they had the goods. So, I would be inclined to take all of these "offers" with a big grain of salt.

[DetBill]

Major law suits here if they try to sell the whole collection,, it quite simply isnt all available for sale,, too many have been donated to the museum for its use only,, Many original donors/familys /foundations will sue like crazy,, Yet the creditors are trying to brainwash everyone everything is for sale,, What a mess. and as usual you have the unions saying they want more,, nothing like hands in a empty cookie jar... The foundations will withdraw their pledge and where will the difference come from when they cant sell all of the art they are boasting they can,, and , as well, will close down the most important cultural asset of this community that has taken generations to build..Great scenario, pensioners will get a fractions of what they want and they close the DIA.. Many dont seem to know when they have it good,, Time to consider another city if this happens,, enough is enough.

[erikd]

I am not referring to bankruptcy law, of which I do not know specifics. I am just pointing out that it would suck to have somebody owe you money and be unwilling to sell their nice art to pay you. I don't feel bad for large financial institutions who were aware- as was everyone else involved, including Detroit officials and union leadership- that Detroit could not ever conceivably pay off all the debt and obligations accrued lo the last many decades. I do feel bad for the individuals who invested in such institutions and their financial products, who will get a very small share of the money to which they were contractually entitled. I can't imagine the anger I would have if I did not have my own money for my retirement, while the city which owed the money didn't have to liquidate their art to pay me. As I said before, I don't want to liquidate the DIA. But at the same time, it seems morally wrong to screw people when you could sell the art and pay them. Art isn't police protection or bus service. It's a luxury. We can keep our luxury while f'ing those we owe money? That's just so wrong.

You are misunderstanding the difference between a luxury and a productive asset.

While the DIA may seem like just a luxury that the city could easily just do without, that is not the reality. The DIA is an anchor institution that draws business, educational, residential, and tourism investment into the city.

If the DIA was shut down and liquidated, how badly would that hurt the ability of Wayne State and CCS to attract students and investment? If the DIA was sold off, how much would that hurt the ability to draw residents and businesses into the midtown and greater downtown area? If the DIA was sold off, how much tourism would the city lose as a result? How many stores and restaurants that serve the DIA patrons would go out of business as a result?

It is not a coincidence that the area surrounding the DIA is one of the few high-growth areas in the city of Detroit. The DIA is a critical asset for Detroit as the city tries to reverse decades of decline.

In addition to that, the DIA is regionally funded, and any sale of DIA art would result in the immediate cancellation of this regional funding.

This is a crucial element for the future of the city and the region. We just passed a regional transportation authority, which needs to have regional funding in order for it to actually function, but if the regional DIA tax were to go south because of art sales, then there is no way that the voters would agree to a regional transit tax. The same goes for the plan to regionalize our water and sewerage system.

Regional funding and operation of metro Detroit's major infrastructure systems are crucial for the long term financial stability of the city and the region as a whole. Metro Detroit is just now starting to embrace regionalism, with the recent agreements to support the DIA and Cobo. The destruction of the DIA agreement would destroy any hope of expanding these early examples of success and expanding them to include mass transit and water and sewerage systems.

Municipal bankruptcy is not about bleeding the city out of anything that can be sold off to pay creditors. It is about restructuring debt, and creating a system that allows the city to reduce debt and grow revenues in order to become financial solvent going forward.

Liquidation of the DIA accomplishes none of these goals.

[erikd]

Municipal law is somewhat strange in that rather than prioritizing the creditors over the city, it's the city that is prioritized over the creditors. If it weren't, NYC would have been forced to sell Central Park to the highest bidder.

Municipal bankruptcy isn't all that different than individual or corporate bankruptcy in that regard. Bankruptcy courts generally do not require the sale of any assets that would harm the ability of the debtor to conduct their ongoing operations or generate future revenue.

When GM, Chrysler, and Greektown Casino went through bankruptcy a few years ago, they were not required to sell off their productive assets in order to pay off creditors. GM didn't have to sell the RenCen, even though it may seem like a big riverfront skyscraper is a "luxury", and not necessary for manufacturing cars.

[Vic01]

Erik, thanks for putting some bottom line, uncommon sense into the discussion.

[corktownyuppie]

Municipal bankruptcy isn't all that different than individual or corporate bankruptcy in that regard. Bankruptcy courts generally do not require the sale of any assets that would harm the ability of the debtor to conduct their ongoing operations or generate future revenue.

I was incorrect; I meant to say that municipal bankruptcy and the corporate Chapter 7 bankruptcy are different. You are correct that in a Ch. 11 situation, the business cannot be required to sell of productive assets.

One of the more relevant differences I find between muni and corp. bankruptcy is this: During the plan of adjustment phase in a Chapter 11, I believe that the creditor can either submit an alternative, competing plan, or they can file a request to have the case converted from Ch 11 [[restructuring) to Chapter 7 [[liquidation). In a muni bankruptcy, Chapter 9, there is no recourse for the creditors if they don't like the plan.

That's a pretty heavy stick the municipality carries. Because it essentially takes forced liquidation off the table, the standard they need to meet to discharge the debts is much, much lower.

[erikd]

I was incorrect; I meant to say that municipal bankruptcy and the corporate Chapter 7 bankruptcy are different. You are correct that in a Ch. 11 situation, the business cannot be required to sell of productive assets.

One of the more relevant differences I find between muni and corp. bankruptcy is this: During the plan of adjustment phase in a Chapter 11, I believe that the creditor can either submit an alternative, competing plan, or they can file a request to have the case converted from Ch 11 [[restructuring) to Chapter 7 [[liquidation). In a muni bankruptcy, Chapter 9, there is no recourse for the creditors if they don't like the plan.

That's a pretty heavy stick the municipality carries. Because it essentially takes forced liquidation off the table, the standard they need to meet to discharge the debts is much, much lower.

There is a reason why creditors and bankruptcy courts can't force liquidation of municipalities. Unlike corporations, there is no alternative organization that can step up and fill the void if you just liquidate municipal assets. If GM or JCPenny gets liquidated in bankruptcy court, there are other companies that will step up and fill the void. If a city or county has all of its assets liquidated, there is no competing market alternative that can just step in and fill the void.

Even more important, the "owners" of municipalities are the citizens and taxpayers, unlike the owners of a corporation, who are just people who have invested their time and money in the company for the purpose of making a profit. Business owners and investors know that they are risking their investment if the business fails. This is not the case with municipalities. If you are a citizen of that municipality, you have to pay the taxes levied, under penalty of law. This is one of the main reasons why the courts have a duty to protect the interests of the citizens and the taxpayers over the interests of creditors.

The creditors who made risky loans to the city of Detroit knew exactly what they were getting into, but they decided that the risk was worth the possibility of making big money. The citizens don't have the option of individually opting out of paying taxes if they don't approve of the way that their tax dollars are being spent. To be sure, the citizens have the ability to vote for their government representatives, but the citizenry is not well versed and knowledgeable about the details and risk/reward analysis of complicated municipal finance and government contracts, unlike the creditors, who have teams of specialists that work on these deals for a living.