The Detroit News has reported that it was Emergency Manager Kevyn Orr who brought in Christie’s to appraise the Detroit Institute of Arts (DIA) collection. Orr, who in turn claimed that he is acting on behalf of creditors, has come under fire in recent weeks for his seemingly cavalier treatment of the DIA collection as the city forges deeper into the grueling bankruptcy process.
What’s strange about the story is that, according to the Detroit News, Christie’s was brought in to appease unsecured bondholders, i.e. a class of creditors who have, generally speaking, a very legally specious claim to city assets in the first place, charitable holdings held in trust notwithstanding: “Many of the nonsecured [sic] creditors have expressed concern that assets, most notably the art collection, are being shielded while they’re being asked to take as little as 10 cents on the dollar of what they’re owed.”
When you look at this position, which seems to adhere to a peacock’s logic of asset evaluation — the collection is “visible,” actual legal ramifications be damned — Orr’s generous treatment of secured creditors, paying investment banks like UBS and Bank of America Merrill Lynch 75 cents on the dollar, seems even more obscene. Regardless, Chapter 9 bankruptcy by definition protects all of the city’s assets, so it’s unlikely — as the DIA has maintained, most recently with a statement posted on their Facebook page earlier this hour — that their artworks will be sold off directly to pay any current creditors.
What is likely to happen is a sort of neoliberal “putting to pasture” of much of Detroit’s infrastructure components — including a possible water privatization (¡Cochabamba!) — as hinted at by this quick two-liner the Detroit News story:
Orr said the auction house will also advise the city on “non-sale alternatives” for realizing value from the collection.
It’s entirely within the realm of possibility that Orr is obliquely referring to a certain provision of Chapter 9 municipal bankruptcy, which is the right of municipalities to borrow further funds during the bankruptcy period:
A municipality has authority to borrow money during a chapter 9 case as an administrative expense. 11 U.S.C. §§ 364, 901(a). This ability is important to the survival of a municipality that has exhausted all other resources.
With the city’s incumbent need for cash — maybe to cover obligations to
disenfranchised pensioners bankruptcy lawyers and financial restructuring advisors — comes the need for ever quicker and dirtier ways to raise the money. And the DIA might find itself in the center of such a scheme, whereby some artworks would be placed into a basket of attractive city assets for the purpose of securing new debt. Although municipalities, Detroit among them, are usually able to access debt markets with unsecured or general obligation bonds that carry no recourse to specific assets, an embattled debtor — as anyone familiar with pawnshops knows — faces steeper burdens.
In this sense, Orr’s use of the the “non-sale alternatives” euphemism may very well lead to some troubled waters for the collection. Just ask Annie Leibowitz, who famously mortgaged her portfolio with the help of a specialty art finance firm and soon found herself in over her head.
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One appraised the city can borrow against the Art. That is what I think will happen.
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