Analysis: What now for the symphony?

Friday, June 7, 2013 at 5:20pm

Let this sink in for a second: In three weeks, you may be able to bid on the Schermerhorn Symphony Center.

News broke Thursday that Bank of America, the symphony’s leading creditor, had served a foreclosure notice on the organization and was putting the Schermerhorn up for auction on June 28. But we’ve been coming to this point for a long time and that can be rightly seen as just the latest tactic in a slowly escalating negotiation.

The two sides have been negotiating over the terms of the debt, which was used to build the beautiful hall for an award-winning set of musicians, for some time. In a letter to patrons on Wednesday, the symphony acknowledged a decline in revenue, noting that it “is operating at a loss and needs to take aggressive action to get its finances in shape.”

But the biggest financial problem — and one that’s not going away — is service on their construction debt. Whether you believe that the 2010 flood caused greater problems than they could have anticipated, as the symphony claims, or that the organization has been burning through money at an unsustainable rate for years, as the banks claim, there is still more than $80 million in outstanding debt.

Bankers were furious that the symphony declined to renew a letter of credit in the spring. Sources told The City Paper in April that they had even examined legal options against the board for a failure of oversight on the symphony’s finances.

What we’re witnessing is a giant game of chicken. Unable to negotiate better terms, the symphony walked away from the previous deal. Unwilling to be strong-armed into reducing the debt, Bank of America called the symphony’s bluff and announced foreclosure.

The symphony only has two options left. It could declare bankruptcy — and said as much when a spokeswoman declared that they would “protect the assets of the Symphony” — but that will only keep the wolf from the door so long. Heading to court for protection also means opening up the organization’s books to the scrutiny of a judge who may or not agree with them. It is a big risk.

Or the symphony can try to exert public pressure on the banks, driving them to a settlement before foreclosure. It's something bankers are sensitive to, and years of bad publicity in the wake of a deep recession have made them reticent to seize such a high-profile landmark so far. To that end, the symphony enlisted the Mayor’s Office and Dean released a letter calling for mediation and not litigation. When asked about the timing of the letter, Metro Legal Director Saul Solomon said that the mayor shared the same outlook as the symphony.

"The Symphony has let it be known to us that they would like to get this thing resolved between them and the banks, without bankruptcy, without foreclosure,” he told The City Paper. “And that is clearly the same position as the mayor has. So the mayor felt that it would make sense for everybody to understand that it's an important part of Nashville and we don't want to see a bankruptcy or a foreclosure if it can at all be avoided."

(Meanwhile, the musicians — who are out of contract this summer and would probably rather negotiate with current management than the banks or a judge — blasted “ruthless bankers” on Friday.)

One question floating around for months has been where the symphony’s (and the city’s) largest patron has been during all of this. One source pointedly asked me, “Where’s Martha Ingram?”

The woman who has done so much for the arts in Nashville finally spoke on Friday.

"In Nashville we have an outstanding symphony orchestra with a world-class concert facility. This has resulted from the unselfish work and support of many Nashvillians,” she said in a statement. “The recession and the flood have caused financial problems that challenge the Symphony, but the organization has excellent leadership and I'm sure they are working diligently to resolve them. I wish them every success in this effort.”

That doesn’t sound like she will be writing a check anytime soon.

Barring Ingram, or some other wealthy patron, stepping into the breach, it appears the two sides have set a 21-day window on their game. And as any player will tell you, the hardest part of chicken is knowing when to flinch.

 

Ken Whitehouse and Steven Hale contributed to this article.

3 Comments on this post:

By: kevin47881 on 6/10/13 at 7:13

Decisions have consequences. If you agreed to the debt you have a legal and moral obligation to make good on that debt. Failure to do so results in forfeiture of assets. This is high school economics and business class material.

By: tnobserver on 6/11/13 at 12:45

Kevin--So Bank of America forfeited all of its assets, right? Oh wait, that's right, the U.S. taxpayer saved the bank from the consequences of its poor lending decisions. In any event, the asset in question--a symphony hall--is unique and is of no value to any purchaser other than a symphony orchestra and there's only one of those in town... The bank needs to cut a deal.

By: GrantHammond on 6/11/13 at 2:51

Resetting the debt clock on this $80M might be the best thing possible for the long term health of the Symphony. Besides, if someone other than a Symphony partnership buys the building, what are they going to do with it?