The safety of the DIA’s collection is close to hand after a deal is reached with the bankrupt city’s biggest creditor
The Detroit Institute of Arts (DIA) has cleared its biggest remaining hurdle to secure its art collection. Last week, the city of Detroit reached a settlement with its largest holdout creditor, the Financial Guaranty Insurance Company (FGIC). As Detroit’s 16-month-long bankruptcy trial comes to a close this week, the 11th-hour deal all but guarantees that the DIA’s collection will not be sold to pay down the city’s debt.
The bond insurer FGIC—which is owed around $1bn of Detroit’s $18bn debt—was one of the most vocal opponents to the so-called “Grand Bargain”, a scheme to safeguard the DIA’s collection while generating money for the city’s pensioners. Under the terms of its recent settlement, the city has agreed to demolish the Joe Louis Arena, home to Detroit’s hockey team, and allow FGIC to develop a hotel, offices and retail stores in its place. In exchange, the company will withdraw its objections to Detroit’s plan to emerge from bankruptcy. Last month, the city reached a similar settlement with the Syncora Guarantee Insurance Company, another major creditor.
The bankruptcy judge Steven Rhodes is due to render a final verdict on the city’s plan—including the Grand Bargain, which is considered its centrepiece—during the first week of November. But some bankruptcy experts already consider it a done deal. “The city was always going to propose a plan that did not involve selling the art,” says Laura Bartell, a law professor at Wayne State University in Detroit. “That’s what they did, and the judge is going to confirm the plan.”
Many expected the fate of the DIA’s collection to remain in limbo well after Judge Rhodes’ ruling, however, because creditors unhappy with his decision were likely to appeal. (FGIC and Syncora previously claimed that a sale of the art collection could garner as much as $8.1bn.) The recent settlements take the possibility of an appeal off the table. The creditors “like what they are getting—they won’t want to appeal”, Bartell says.
If both the city council and Judge Rhodes approve Detroit’s proposed plan—which they are expected to do—the DIA will be spun off as an independent non-profit. The state of Michigan has teamed up with local and national organisations to pledge $816m over 20 years to the cause. The money would essentially fund a “buy-back” of the collection from the city of Detroit while providing pensions to retirees from the city’s police and fire departments. (Donors to the so-called Grand Bargain include the Los Angeles-based J. Paul Getty Trust, General Motors and the DIA itself, which pledged $100m.)