The Philadelphia Orchestra Association’s (POA) plan to emerge from bankruptcy has been approved by the U.S. Bankruptcy Court for the Eastern District of Pennsylvania. The POA, which filed for Chapter 11 protection in April 2011, expects to emerge from bankruptcy by the end of July.
“In receiving plan confirmation, we are now well positioned to rebuild our audiences, rebuild our donor base and grow our endowment,” said POA Chairman Richard Worley.
The 112-year-old orchestra will cut the number of its musicians from 105 to 95 and reduce the remaining musicians’ pay by about 15 percent. It renegotiated its lease with its venue, the Kimmel Center for the Performing Arts. It has also severed ties with Peter Nero and the Philly Pops and the American Federation of Musicians and Employers’ Pension Fund (AFM-EPF).
The POA will pay $5.45 million as part of a settlement addressing approximately $100 million in claims, debts and liabilities. As a condition of exiting bankruptcy, the Orchestra will have to pay four creditors about $4.25 million by the end of July. The creditors include the Pension Benefit Guaranty Corporation, the Kimmel Center, Peter Nero and the Philly Pops, and the AFM-EPF.
In May, the POA and the AFM-EPF settled what had been a dispute regarding severing ties. The AFM-EPF contended that the POA would have to pay a $23 million penalty to withdraw from the pension fund, and later revised the number to $35 million.
The AFM-EPF wanted the POA to pay the penalty from its $120 million restricted endowment, which the POA argued was impossible due to restrictions on the endowment imposed by donors at the time of donation. The dispute was settled for $1.75 million. Had the two sides not come to an agreement, the AFM-EPF would have opposed the Plan of Reorganization in court.
Around the time of the bankruptcy filing, the Orchestra Association created the Transformation Fund to assist with the bankruptcy proceedings and restructuring. It has raised about $37 million through the Transformation Fund, $8.9 million of which will be used to pay for service fees and other restructuring costs.
The orchestra filed for Chapter 11 in part due to a $14.5 million structural deficit and a dwindling operational budget. Additionally, it has spent its unrestricted endowment. The POA, a member of the so-called “Big Five” along with the orchestras of New York City, Boston, Chicago and Cleveland, became the first major U.S. orchestra to file for bankruptcy.