April 9 (Bloomberg) — Detroit could get four offers to turn some of its art collection into as much as $2 billion in cash, either as a loan backed by the works or as a purchase, creditors including bond insurers said in a court filing.
The creditors today asked U.S. Bankruptcy Judge Steven Rhodes to force the city to cooperate with the potential bidders, who would like to investigate the value of the art.
The proposals were quickly dismissed by Detroit's emergency manager, Kevyn Orr, who said any sale would not only kill a proposal to pump $816 million into the city's underfunded pension systems, it would also hurt residents.
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"You sell any art and you're impacting the quality of life of the city," Orr said in an interview today. "Because just like New York didn't have to build coops in Central Park when it was going through its troubles, Detroit should not have to denude itself."
The possible bidders include Catalyst Acquisitions LLC/Marc Bell Capital Partners LLC, Art Capital Group LLC, Poly International Auction Co. and Yuan Management Hong Kong Ltd.
The city has proposed keeping the collection intact in exchange for more than $816 million from foundations and the state of Michigan. That money would be earmarked for public worker pensions, which face cuts in Detroit's record $18 billion bankruptcy.
Picasso Works
The Detroit Institute of Arts collection includes works by Vincent van Gogh and Pablo Picasso. Christie's issued a preliminary report saying part of the collection was worth as much as $867 million. The museum has opposed any sale, citing a legal opinion from Michigan's attorney general that the art is held in a charitable trust and can't be part of any auction to satisfy the city's debts.
At least one of the potential bidders said its plan would keep the art in the city.
Art Capital Group's proposed loan the city $2 billion backed by the collection will allow "the people and community of Detroit to keep its treasured art assets," Montieth M. Illingworth, a spokesman for Art Capital Group said in an e- mail. "We also believe that our proposal addresses the requirements of creditors and is superior to the alternatives that have been made available today."
Celebrity Photographer
In 2009, Art Capital sued celebrity photographer Annie Leibovitz, claiming she reneged on a sales agreement connected to a $24 million loan the firm had made to her. In 2010, private-equity firm Colony Capital LLC settled her debt with Art Capital and announced a new contract with the photographer.
Poly International, an auction house owned by China's government, seeks to buy all the Chinese works in the city's art collection for as much as $1 billion, according to court filings.
Yuan said it would like to buy 116 works for as much as $1.47 billion and Catalyst said it may be interested in paying as much as $1.75 billion for the entire collection.
The creditors called the potential offers "preliminary indications of interest." The companies must be given the chance to inspect the pieces they are interested in and study the documentation related to the art, according to today's filing.
This is the second time creditors have asked the judge to force the city to cooperate with an independent assessment of the collection. The previous motion didn't include any offers.
The creditors hired investment bank Houlihan Lokey to investigate how the art could be used to repay them. Houlihan sent information about the collection to 32 parties, four of which submitted potential offers, the creditors said in the filing.
Creditors argue that the city can't win approval in July for a plan to adjust Detroit's debt without considering alternative proposal for the art.
The case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).
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