Sources: Banks could foreclose on Schermerhorn Symphony Center as soon as this week

Monday, April 8, 2013 at 4:25pm

 

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.

 

12 Comments on this post:

By: Jughead on 4/8/13 at 2:43

The NSO needs a management overhaul. It is in crisis due to incompetence and arrogance. Yes---the flood did not help--but this is an organization that could not survive in good times.

I am not renewing my seats...could send in my money, then have these dillweeds declare bankruptcy and I get nothing.

By: Rasputin72 on 4/8/13 at 4:34

The symphony does not appeal to the element that voted for Obama. The symphony is only adopting what has worked for the homeless and the underclass. Send us a subsidy like dregs of the earth. At least we are entertaining.

P.S. The sympgony on its worst night is more entertaining than ice hockey. The icehocket team gets a subsidy.

By: Ask01 on 4/9/13 at 1:12

I believe symphony management should consider efforts to attract a broader following.

Some open air concerts, perhaps across 4th Avenue in front of the CMHOF, or, even better, some offerings at the Centennial Park venue.

Imagine, traditional and contemporary classics, performed in an relaxed open air setting, exposing some segments of society to a musical genre they have otherwise never experienced. This could generate good will and positive responses all the advertising money in the world could never buy.

The best case scenario could be recruiting an entire new audience to support the NSO, or at least inspiring financial support from businesses and corporations recognizing the advertising value.

Just a thought.

By: govskeptic on 4/9/13 at 6:50

Does the symphony use good financial advice about operating prudishly with
the false notions the city is their backstop on finances? Secondly, this talk of
foreclosure shows how Tenn law allows the fastest path to foreclosure than
any other state. Why? Because the Financial Lobby gets their way on this and
virtually any other self serving request make to the legislature over the last
very many years. Same goes for all the different Insurance Industry request.

By: Kosh III on 4/9/13 at 7:09

The Symphony has gotten millions in welfare checks from Metro yearly.

It's customer base is too narrow, not because people don't enjoy good music but not everyone can afford seats which begin at $43 and go up. A family of 4 could easily spend $500 just for two hours of fine music.

By: localboy on 4/9/13 at 8:42

"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." Maybe they should start by reducing the board by one or two seats...betcha a report during a board meeting resembles a cat in a room full of rockers.

By: PKVol on 4/9/13 at 9:11

It seems as if being a "Board Member" is more honorary than responsibility-bearing. Could it be that many of these 60 "Board Members" are also major donors and being named to the board is simply a pay-back for contributions.

I have been a Symphony season-ticket holder for 3 seasons (Pops Series) and attended a few shows prior to that time. The music by the orchestra is ALWAYS top notch, the selection of the headline acts is varied and generally very good. In light of these recent events, I am approaching renewing my season tickets with some amount of caution. I do not wish to become a creditor of the NSO in a bankruptcy filing.

By: mars on 4/9/13 at 9:19

I owned and operated a profitable venue for 12 years. It is apparent that the current manangement of the symphony are not capable and have tried to market a product that the local community does not support well enough for the product and venue to survive- even with subsidy. Time to reorganize the board and eliminate operations management. Will the symphony survive ? Doubt it, but hope so

By: jeffrey31 on 4/9/13 at 1:01

I agree that the symphony has been mismanaged by the board. Board members and senior staff (at least 5 of whom receive salaries of six figures according to the most recent IRS filings I could locate) must be held accountable for the organization's lamentable state.

That said, allegations of "millions in welfare checks from Metro yearly" are clearly incorrect. The subsidy received by the symphony for general operating support from the city was $157,500 for FY2011-2012 (there was also a $5000 grant for an educational program) and $87,000 from the state, out of a total budget of approximately $27 million.

By all means, let's have a discussion about arts funding and who should pay for culture, but let's not base such discussion on hyperbole, misinformation, exaggeration, misunderstanding, or deceit.

By: BigPapa on 4/10/13 at 6:47

Marth Ingram is sitting on a cool billion or two, she can pick up the tab.

Seems a lot of "free market" folks that support the symphony arent too free market when it comes to their little pet project.
$150,000 doesnt sound like much, but Metro would be better off if they just sent a poor families instead of funding this.

By: Jughead on 4/10/13 at 7:17

It would be tragic if the symphony had to cease operations. It' time fire all management and hire folks who are not arrogant and overpaid eccentrics. BTW--the lawyer Robert Mendes has extensive experience handling corporate bankruptcies. My guess is NSO will file Chapter 11 and shed some debt, reorganize, and hopefully emerge in a few years with new and effective management.

By: PKVol on 4/10/13 at 8:58

If you keep doing what you've always done, you'll keep getting what you always have.