The Philadelphia Orchestra Association and Academy of Music Reorganization
With its earned income, endowment and contributed income having declined for several years, while its operational costs increased, including its pension and collective bargaining obligations, lease payments and payments owed to related entities, The Philadelphia Orchestra and Academy of Music turned to Chapter 11 as a forum in which to address and restructure their financial condition.
In Chapter 11, the Orchestra was able to use section 1113 of the Bankruptcy Code to renegotiate its collective bargaining agreements despite significant risk that the Orchestra musicians would strike. The successful renegotiation and avoidance of strike was mediated before then Judge Steven Raslavich and the modifications and settlement were approved by the Bankruptcy Court. The modified collective bargaining agreement terminated the Orchestra’s participation in the musician pension fund, AFM-EPF, triggering withdrawal liability. The pension fund sought to reach the Orchestra’s endowment to satisfy the withdrawal liability or otherwise obtain administrative priority for the withdrawal liability. Dilworth attorneys successfully protected the endowment of the Orchestra and Academy and negotiated a settlement with the pension fund that was incorporated into the Chapter 11 plan of reorganization. Likewise, shortly after obtaining a settlement with the pension fund, Dilworth attorneys successfully settled claims brought by the Pension Benefit Guaranty Corporation resulting from the “distress termination” of two single-employer pension plans.
The Orchestra and Academy also successfully negotiated a rent reduction with the Kimmel Center under an amended lease to allow the Orchestra to continue its performances at the Kimmel Center.
The terms of the Chapter 11 Plan prepared by Dilworth attorneys were negotiated with the various classes of creditors and interest holders, ultimately becoming a fully consensual plan (though one insider class failed to vote) and was confirmed by the Bankruptcy Court. As a result of the plan, The Philadelphia Orchestra today is healthy and thriving.