Philadelphia Orchestra Needs to Cut Debt

The Philadelphia Orchestra may make beautiful music, but if they don’t come up with a better plan to erase their debt they may end up in a financial spiral downward. Already, the orchestra has laid out its plan to erase some of their dues and exit the bankruptcy court. The orchestra submitted a plan to the U.S. Bankruptcy Court in Philadelphia a few weeks ago. They are currently waiting for the bankruptcy judge and creditors to approve or deny the plan. They hope that they can emerge from a Chapter 11 in July 2012.

The filing on April 16^th, 2011, was one of the rarest situations and shocked many classical musicians. Major orchestras in the country hardly ever end up in a financial danger zone. While smaller orchestras may end up struggling with their budget, most of the large groups have always been financially sound. The Philadelphia Orchestra says that declining ticket sales and fewer donations have led to their demise. They needed to file for bankruptcy to eliminate pension expenses and reduce musician salaries and operating bills.

In their new plan, the orchestra aims to transfer unfunded pension liabilities to the federally backed Pension Benefit Guaranty Corporation. The corporation says that the liabilities rest at about $62 million and the orchestra is proposing to pay $1.3 million. The sides are still volleying ideas back and forth, but the orchestra’s lawyers think that the plan will resolve the issue. If the plan goes into action, seven retired musicians will not receive their pensions. The orchestra currently has about $554,000 due to various creditors that include a restaurant, a hotel, the company that prints the orchestra programs, and others. There are 58 creditors in all. While funds may be tight for a while, the musicians are confident that they will be able to come out on top in the end if they can stick to the new plan.