The ongoing financial crisis surrounding the Nashville Symphony appears to be headed for a crescendo.
The $82.3 million in bonds owed by the symphony have already been called in, but The City Paper has learned that the financial institutions involved have given the symphony a deadline of this week for payment on outstanding debts or foreclosure proceedings could begin. The foreclosure process would take about three weeks.
What would be expected to occur in short order is that the Nashville Symphony could declare bankruptcy in an attempt to avoid losing the Schermerhorn Symphony Center. In a letter to patrons last month, Ed Goodrich, chairman of the symphony board, and Alan Valentine, president and CEO, said the board’s goal was to “achieve a comprehensive financial restructuring that significantly reduces or even eliminates the Symphony’s long-term debt.” The letter went on to say that the board would “consider all available alternatives.”
On Monday, symphony spokeswoman Laurie Davis told The City Paper, “We are still negotiating. We're pretty much in a holding pattern. Nothing has changed.” When asked specifically about declaring bankruptcy, Davis said, “We are still negotiating.”
Noted Nashville bankruptcy attorney Robert Mendes of Frost Brown Todd confirmed that he has been retained by the symphony. Mendes declined to comment further on matters regarding his client.
By not renewing a letter of credit that backed their bonds, the symphony put in motion this set of events three weeks ago, attempting to renegotiate the terms of their long-term debt.
Sources close to the situation said that the involved financial institutions are evaluating legal options related to the 60-plus-member board’s oversight of the symphony’s finances, including any potential liability issues. Frustration is high among members of the financial institutions over the narrative put forth by the symphony that their money woes are related to the 2010 flood, when they claim the symphony has consistently lost money on its operations.
The symphony acknowledged those shortcomings to the Nashville Scene two weeks ago.
“What happened was our original business plan did not work out the way we thought, so there was only a slim chance that we would have been able to pay back the entire debt on schedule. We felt it would have been irresponsible to run out of cash later, so we decided we needed to renegotiate the debt right now,” said Kevin Crumbo, president of KraftCPAs’ turnaround and restructuring group and the symphony board’s treasurer.
Various board members contacted by The City Paper over the past two weeks have stated that they had been unaware of the depth of the financial problems experienced by the organization until the symphony leadership announced the situation publicly three weeks ago.
Those board members, who asked for anonymity from The City Paper because they feared reprisals from senior board members, stated that financial documents they received at board meetings were only summaries and held cursory information that they were not allowed to take with them at the close of the meetings. The board members also said that they never saw full financials that detailed recommendations made by outside auditors. They stated that the large board generally operates without acrimony and generally accedes to the wishes of the board’s officers.
A possible remedy that the banks involved are exploring is taking possession of the building, recruiting new organizational leadership, and reconstituting the symphony under new management. A bankruptcy filing by the symphony would put a temporary hold on any such move but would also open the organization’s finances up to outside scrutiny.