Bankrupt Detroit offered bigger loan secured by art

Wed Aug 27, 2014 3:52pm EDT
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By Karen Pierog

(Reuters) - A New York-based specialty finance group is ready to loan Detroit as much as $4 billion, double its previous offer, if the bankrupt city uses the masterpieces in its art museum as collateral, according to a new proposal that surfaced this week.

Art Capital Group, which offered to loan the city $2 billion earlier this year, doubled the offer based on a recent appraisal that determined the Detroit Institute of Arts' (DIA) collection was worth more than $8 billion.

"We're prepared to provide a loan, secured by the art collection, that is a balanced, fair and equitable solution for the city so that it can emerge from bankruptcy with the money it needs to secure a better future," Montieth M. Illingworth, spokesman for Art Capital, said in a statement.

Notable works at the DIA include Pieter Bruegel's The Wedding Dance, Vincent van Gogh's Self-Portrait with Straw Hat and Rembrandt's The Visitation.

But the city, which filed the biggest-ever municipal bankruptcy in July 2013, is not entertaining the proposal.

"We think this is a thinly veiled attempt to discredit the grand bargain," said Bill Nowling, spokesman for Detroit Emergency Manager Kevyn Orr.

Detroit's plan to adjust $18 billion of debt includes the so-called grand bargain, which taps $366 million pledged by philanthropic foundations and $100 million from the DIA over 20 years, as well as a $195 million lump sum payment from the state of Michigan to ease pension cuts for city retirees and save the museum's collection from being sold to pay creditors.

Hold-out creditors have attacked the grand bargain, claiming the deal gives Detroit retirees a bigger recovery than other similarly situated creditors like themselves.   Continued...

A visitor stops to look at a painting by Picasso at the Detroit Institute of Arts in Detroit, Michigan June 2, 2013. REUTERS/Rebecca Cook