The Philadelphia Orchestra Association (POA) and its wholly owned subsidiary, the Academy of Music, Inc. (AOM), today announced it has filed with the United States Bankruptcy Court its Plan of Reorganization (POR) and Disclosure Statement, signaling its organizational and financial preparedness to exit from Chapter 11 bankruptcy protection.
In filing for reorganization on April 16, 2011, The Philadelphia Orchestra Association detailed several goals that needed to be accomplished to ensure long-term financial health for the organization, including preserving artistic excellence. These goals included a renewed collective bargaining agreement with the musicians of The Philadelphia Orchestra; a shift away from its defined benefit pension plans, including an exit from the American Federation of Musicians and Employers’ Pension Fund (AFM-EPF); a renegotiation of its lease with the Kimmel Center; and a resolution of its challenged business relationship with Peter Nero and the Philly Pops (PNPP).
Every goal detailed at the outset of this difficult yet necessary process has been accomplished consensually through settlements and agreements-in-principle achieved via the bankruptcy process.
In its filing, the Association has agreed to pay $5.49 million to creditors. Of that total, $4.25 million will be paid on or before the POR effective date. Although there will be additional payments to some key creditors, the vast majority of claims will be fully paid on the effective date as established by the U.S. Bankruptcy Court and the Association. The breakdown of key creditors’ total payments—which reflects full settlement of all claims—is as follows:
Pension Benefit Guaranty Corporation (PBGC): Currently estimated at $1,317,387
American Federation of Musicians and Employers' Pension Fund (AFM-EPF): $1.75 million
The Kimmel Center: $748,000
Peter Nero and the Philly Pops (PNPP): $1.25 million (This will be paid in full prior to the Association’s exit).
The remaining General Unsecured Claims against the POA will receive payment equal to 50% of the aggregate amount in U.S. dollars, without payment of interest (Estimated Total: $276,855). The remaining General Unsecured Claims against the AOM will receive payment equal to 100% of the aggregate amount in U.S. dollars, without payment of interest (Estimated Total: $85,891). Convenience Class Claims will receive 100% of their respective claim if the claim value is $1,000 or if the holder of the claim reduces the claim to $1,000 (Estimated Total: $38,616).
“With the number of business relationships that needed to be re-set within the Orchestra’s reorganization process, we are incredibly proud, and incredibly grateful, that we have been able to file a consensual Plan of Reorganization,” said Richard B. Worley, Chairman of the Board of Directors for The Philadelphia Orchestra Association. “It was always our goal to reach settlements with our partners in this process as we had a keen awareness of how valuable peace was within this difficult process. Our Board of Directors sought consensus at every turn and at every agreement. It took significant time but I believe that it is time well spent as the Association was able to address more than $100 million in claims, debts, and liabilities with a settlement of just $5.49 million. We have not only ensured that The Philadelphia Orchestra will remain vibrant through the Plan of Reorganization but we have restructured for long-term fiscal health, ensuring the Orchestra’s vibrancy for generations to come. I could not be more grateful to all of our partners who recognized the Orchestra’s important role as a cultural icon and found a way to reach agreement with us based upon our critical needs.”
In addition to the $3 million needed to settle creditors’ claims on the POR effective date, which is a condition to exiting bankruptcy, the Association incurred $8.9 million in professional service fees and other direct restructuring costs. All of the funds necessary to address the settlement of creditor claims on the POR effective date, the professional service fees, and other direct restructuring costs have been raised. The funds raised for the Association’s settlement of claims on the POR effective date come from gifts to the Transformation Fund made by members of the Association’s Board of Directors. The funds pledged to address the professional services fees and other direct restructuring costs also come from gifts to the Transformation Fund by members of the Association’s Board of Directors matched by a major funder who designated that its gift could be used for bankruptcy-related costs.