PHILADELPHIA – The Philadelphia Orchestra, in Chapter 11 since April, has agreed to put up its musicians’ instruments for collateral on new financing with Sun FCU in Maumee, Ohio, it hopes will allow it to exit bankruptcy.
The U.S. Bankruptcy Court has scheduled a hearing on the $3.1 million loan for Oct. 26. The debtor-in-possession loan will be used by the Orchestra to pay operating costs, including salaries and vendor bills.
The member business loan would carry a 7.25% rate (9.25% if the Orchestra defaults or moves to Chapter 7 bankruptcy), and closing costs of $15,500. The loan likely would be repaid in several months.
As collateral, the Orchestra would put up its musical instruments and orchestral library of scores and instrumental parts, property, among other tangible and intangible possessions.
“Unless these expenses are paid, the Debtor will be forced to cease operations, which would likely result in irreparable harm to its organization and jeopardize the Debtor’s ability to reorganize and maximize value for all interested parties,” the Orchestra said in papers filed Wednesday with the bankruptcy court.
The Orchestra said it intends to use Chapter 11 to gain relief from pension obligations, secure a new lease with the Kimmel Center where it performs, and structure a new union contract with musicians.
As part of the bankruptcy, the court on Wednesday approved a separate agreement under which the Philly Pops, directed by Peter Nero, will separate from the symphony.
