CHICAGO – A group of Detroit’s creditors, including bond insurers and pension certificate holders, has asked the judge overseeing the city’s Chapter 9 bankruptcy case to appoint a committee to evaluate the city owned art of the Detroit Institute of Arts museum.
The motion, filed Tuesday afternoon in federal court, touches on one of the most controversial aspects of the case so far: whether the city should monetize its storied art collection.
Next to the city’s water and sewer department, the Institute’s art collection is considered Detroit’s most valuable asset.
Detroit emergency manager Kevyn Orr in August hired auction house Christie’s to assess the collection, but has yet to announce the results.
The art collection is rumored to be worth around $2.5 billion, and therefore the city must prove that it has a plan that maximizes the value of the art to “enhance creditor recoveries,” the motion says.
Detroit hopes to file a plan of adjustment by the end of December, and the formation of a DIA committee could head off any potential litigation from the city’s plan – or lack of one – for the art, the creditors said.
“Based on the city’s conduct to date, there is a significant chance that the plan of adjustment it files will engender lengthy and contentious litigation due to a failure to provide for monetization of its non-essential assets, including the art, potentially one of the city’s most valuable assets,” the court brief says. “By this motion, the creditors seek to put in place a process that will allow the city to reach a consensus with creditors and avoid the delay and waste of resources that would result from such litigation.”
The committee would be made up of creditors who would hire an outside arts consultant to analyze the collection. The committee would also consider ways to monetize it, the motion says.
“This collaborative process will enable the city and creditors to explore a wide range of options to monetize the art, including options that preserve the DIA as a culturally relevant institution as well as enhance creditor recoveries, in order to reach a consensus about the treatment of the art under the plan,” the motion says.
Creditors who filed the motion include bond insurers Financial Guaranty Insurance Company, Syncora Guarantee Inc., and Ambac Assurance Corp. Four European banks that own some of the city’s pension certificates, Dexia Credit Local, the city’s largest union, and a committee representing 23,000 retirees are also on the brief.
Orr has proposed floating $2 billion of notes to pay off $11.5 billion of debt to unsecured creditors, including those who filed the motion Tuesday.