The Philadelphia Museum of the Jewish Experience in America is on the verge of bankruptcy.
The National Museum of American Jewish History has received US Bankruptcy Court approval for a reorganization plan that includes the sale of its building on Independence Mall to a former board member who will then rent it to the museum for a fee modest. Some creditors in the case will receive part of their claims, while others have agreed to write off the debt on almost everything owed to them.
Executives at the museum, which moved to its new premises on Independence Mall in 2010, hailed approval of the plan as the start of a new day.
“We are out of debt and have a bright new future,” said Misha Galperin, CEO of the museum.
Chief Justice Magdeline D. Coleman of the US Eastern District Bankruptcy Court issued her order confirming the plan on Thursday.
The museum filed for Chapter 11 protection in March 2020, citing debt of more than $ 30 million, and closed its doors days later as part of the pandemic halt. The bankruptcy rendered the museum ineligible for government pandemic funds enjoyed by other cultural groups, and most staff were put on leave and ultimately fired.
Executives hope it can resume exhibits and reopen to the public this fall.
The majority of the museum’s debt – coupled with its unpaid and delayed donations for construction over a decade ago – was held by two groups of creditors: a bank and a dozen members of the board and / or from donors in the form of bond debt. As part of the bankruptcy settlement, this dozen bondholders – businessmen and philanthropists like Sidney Kimmel, George and Lyn Ross, Ronald Rubin and Joseph Zuritsky, or their trusts – agreed to forgive the most of $ 13 million owed to them, only ending up with $ 100,000 to be distributed among the group.
Negotiations with the Dime Community Bank, which owed about $ 17 million, were “a bit prolonged, but not so much on the amount and on how to charge it,” said Lawrence G. McMichael, counsel for the. Dilworth Paxson Bankruptcy Museum.
That’s when Mitchell Morgan stepped in, McMichael said. Morgan and his family paid $ 10 million, which will almost fully satisfy the debt to Dime Community Bank and give them ownership of the building. Morgan, founder and CEO of Morgan Properties, a large apartment investment and management firm, will lease the building to the museum at a significantly reduced price.
McMichael said appraisals had determined the fair market rent for the building to be between $ 3 million and $ 3.5 million per year. Morgan will receive $ 12,000 per year.
“This allows the museum to truly thrive without any burden of lease payments or debt,” said McMichael. (As part of the deal, the museum will pay Dime Community Bank a total of $ 360,000 in monthly installments during the year.)
The plan provides for a 42-month lease on the space and allows the museum to buy back the building if it is able to raise the funds to do so. The price to pay would be $ 10 million plus 4% accrued per year. (If a buyout were to take place in a year, the sale price would be $ 10.4 million.)
When asked if a buyout was likely, Galperin replied, “If I was a gambler I would say yes. But this is not our first order of business.
Very immediately, he said, the museum needed to rebuild the staff, reopen and continue an integration with the Smithsonian Institution. It is currently a museum affiliated with the Smithsonian but hopes to become a real arm of the institution, which would give it some government support and make admission free.
In addition to the Dime Community Bank and the dozen bondholders, a group of 123 small creditors who originally owed $ 366,000 will receive just under 14 cents on the dollar, McMichael said.
Even with confirmation of the plan on Thursday, the museum is still not technically out of bankruptcy. The logistics of signing the papers and moving the money to make the plan effective will take a few more weeks, McMichael said, with an exit from bankruptcy expected on or around September 15.