DETROIT (AP) — A judge in Detroit’s bankruptcy refused to
grant hands-on access to a valuable trove of art Thursday, telling
creditors who face steep losses in the case that they can visit a city
museum and browse the walls like any other patron.
Bond insurers
have pointed to the art as a possible billion-dollar source of cash in
the bankruptcy. But the city is firmly opposed to any sale and instead
is banking on a separate, unique deal that would protect the art forever
and soften pension cuts for thousands of retirees.
Attorneys for
Syncora Guarantee and Financial Guaranty Insurance said potential buyers
should be allowed to look at certain pieces at the Detroit Institute of
Arts, even remove them from the walls and examine the backs.
"The record fails to justify this extraordinary relief," Judge Steven Rhodes said after hearing
arguments for more than an hour.
He said creditors don’t deserve special treatment and instead can go to the museum and look at the art
"like everyone else."
Art
has been a hot issue in the bankruptcy because many creditors believe
pieces could be sold to pay debts. City-owned art has been valued at
$450 million to $870 million, but some Wall Street creditors say that’s
way too low.
A so-called grand bargain favored by Detroit,
wrapping in illustrious art and city retiree pensions, involves $816
million from foundations, philanthropists, the museum and the state of
Michigan. The state’s part, a $194.8 million lump sum, remains unsettled
in the Capitol.
The money would be exclusively earmarked for pensions.
"To
us, the grand bargain is not grand. It’s more grandiose than grand,"
said Marc Kieselstein, an attorney for New York-based Syncora, which
could lose hundreds of millions of dollars in the bankruptcy.
He acknowledged the art is a "glittering link to the glory days of Detroit."
"But
in bankruptcy, some of those rarified things, those edifying things,
have to yield to things more base. Perhaps people would say more grubby"
— such as creditor losses, Kieselstein said.
The creditors said
they’ve found buyers willing to pay more than $1 billion for parts or
all of the collection; one wants all Chinese art.
But under
Detroit’s bankruptcy exit plan, the museum would take control of
thousands of pieces of city-owned art already there. The DIA, as it is
known, has promised to raise $100 million of the $816 million pledged to
ease cuts for retirees whose pensions are being reduced.
Rhodes,
who will approve or reject the city’s entire bankruptcy strategy later
this year, has repeatedly signaled that one-time asset sales probably
are not a good idea. He said the art would not have been available to
creditors if Detroit had chosen to skip bills and fix its finances
outside of bankruptcy.