CHICAGO -- The Detroit Institute of Arts will try to raise $100 million as part of a high-profile public-private effort to raise money to pledge to the city's pensions while safeguarding the museum's prized art collection.
The mediators overseeing the bankruptcy case announced the deal Wednesday. It was the second pledge to the first-of-its-kind plan in two days. On Tuesday, the Kellogg Foundation said it would donate $40 million to the effort.
Foundations have already raised $370 million, and the DIA contribution would push that to $470 million. The fund would total $820 million with a proposed state pledge of $350 million.
"While everyone understands that current proposed pension funding levels are not sufficient to provide full restoration of pension benefits for Detroit's retirees, the mediators deeply appreciate the DIA's very positive and constructive contribution as yet another important step forward. The mediators remain dedicated to continuing their work toward mitigating as much as possible the adverse impact of the bankruptcy upon the retirees and their families as part of a complete, balanced and agreed-upon plan of adjustment."
The deal would give the DIA the title to the museum building and its art collection, both now owned by the city, according to a report in the Detroit News.
A group of local and national foundations two weeks ago formed a fund to raise up to $500 million that can be pledged to the city's unfunded pension obligation, estimated at anywhere from $700 million to $3.5 billion.
The deal would protect the art collection in the DIA, which emergency manager Kevyn Orr has said several times could be sold to help raise money for the creditors.
Gov. Rick Snyder last week announced he would ask Michigan lawmakers to pledge at least $350 million in state funds to the effort.
The DIA until now has been quiet on its own ability to pledge money. The mediators' statement Wednesday is the first glimpse of a possible pledge from the cash-strapped museum.
The DIA said in a statement it has compiled a list of donors to raise the money, all of which will go to a third party who will disburse it for pension payments.
"It's important to note that the DIA is not in bankruptcy, in fact it is functioning extraordinarily well," said Eugene Gargaro, chairman of the DIA Board of Directors, in a statement. "And, while this new challenge will stretch our fundraising abilities to their capacity, the DIA will continue to provide the residents of Detroit and Michigan with amazing art and exciting programs."
"The DIA has consistently met its financial challenges and goals and will meet this challenge with enthusiasm and confidence," Gargaro said.
As part of the deal, the DIA will also "provide exhibitions and education programs to cities through the state, thus making the DIA's generous participation truly a win-win-win for Detroit's retirees, the DIA and, now, all of the residents of our great state," the mediators said.
The state and foundations have said the deal will close only if the money goes solely to pensioners and no other creditors.
Bondholders have been hesitant about the plan. Fitch Ratings on Monday put out a statement warning that the plan is bad for bondholders because it elevates pension claims over bond debt.
In separate news, the Detroit Free Press Wednesday cited unnamed sources saying that the city had sent its plan of adjustment to creditors.
