Philadelphia Orchestra May Declare Bankruptcy
Steve Legato for The New York Times

The Philadelphia Orchestra at a concert, after having handed out leaflets opposing a bankruptcy filing.
By DANIEL J. WAKIN
Published: April 15, 2011

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Painting a dire financial picture, leaders of the troubled Philadelphia Orchestra said on Friday that bankruptcy protection was vital to its survival.
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Steve Legato for The New York Times

The violinist Louis Lanza distributing the leaflets.

The orchestra’s board was to vote on Saturday whether to seek protection under Chapter 11 of the bankruptcy code. Officials said concerts would not be affected.

While orchestras have filed for bankruptcy before, either to reorganize or to dissolve, the Philadelphia Orchestra would be the most prominent in recent memory to do so, and such a move would be a striking sign of the difficulties symphonies and opera companies are facing these days. The decision comes as the players and management have been locked in difficult contract negotiations.

“It gives us a better chance of raising the investment funds that are needed to revitalize this orchestra over the next five years,” Richard Worley, the board chairman, said of a Chapter 11 filing. “We need a fresh start. We need to escape contractual entanglements that we cannot possibly afford.”

The largest such entanglement, he said, was the cost of musician pensions, which amount to a total of around $46 million, a figure that the players dispute, saying the amount is only about $8 million.

Orchestra officials said they were basically out of cash. Joseph Bondi, a financial consultant advising the management, said the orchestra could meet its bills for only about two more months. Mr. Bondi and the officials spoke in a joint telephone interview.

A Chapter 11 filing would also presumably buy time with other business partners, including the orchestra’s landlord, the Kimmel Center. “It gives the company the opportunity to review all of its contracts,” Mr. Bondi said.

According to figures provided by the orchestra, ticket sales and other revenue are expected to bring in $14.1 million this season. Annual fund-raising, gala proceeds and endowment income will bring in $18.9 million. The $33 million total compares with what the orchestra said was $46 million needed to run the orchestra. Even with additional, emergency fund-raising, the deficit is expected to be $5 million.

A bankruptcy filing is “protection at a time when our cash is running very low, and it’s a path for us to get to our five-year plan,” said Allison Vulgamore, the orchestra’s president and chief executive. The plan envisions raising another $100 million for the endowment, which now stands at $140 million, and $60 million in operating money to invest in the orchestra’s artistic plans, she said. Deficits would continue but diminish.

John Koen, a cellist in the orchestra and the head of the players’ union, condemned the bankruptcy filing.

“The musicians are extremely opposed to this because it’s unnecessary and it would be damaging to the institution,” Mr. Koen said. “It’s absolutely the wrong decision.”

In a tactic previously used by other musicians in labor disputes, the Philadelphia players briefly left the stage before their concert on Thursday night and passed out leaflets to the audience calling on people to oppose a bankruptcy filing. The leaflets said such a filing would make it hard to attract “the best new players” and hurt the orchestra’s ability to raise money.

The musicians and orchestra executives have been negotiating to reach a new contract with the help of a mediator since the old pact expired last season. Terms — including salaries — have been frozen since 2008. The players gave up raises in an effort to help, and managers have taken pay cuts. The staff has also been reduced.

The orchestra has long been in severe financial difficulties. Mr. Koen blamed high rent at the Kimmel Center and the diversion of revenues from shows at the Academy of Music, its old stage, partly for the problems. Money taken in from presentations there goes to the Kimmel under the orchestra’s arrangement with the hall, Mr. Koen said.

Part of the orchestra’s woes stem from a leadership vacuum several years ago when it lacked a permanent board chairman, chief executive and music director. (The French-Canadian Yannick Nézet-Séguin will become music director in September 2012.) Mr. Koen also faulted what he called two decades of bad management, especially a “failure to market the orchestra appropriately and hire quality people for development.”

The troubled economy has taken its toll on orchestras. The Detroit Symphony just finished a bruising six-month strike that ended with large pay cuts. The Louisville Symphony filed for bankruptcy reorganization last year, and the symphonies of Honolulu and Syracuse went out of business in recent months, although a group of backers is trying to reconstitute the orchestra in Honolulu.
A version of this article appeared in print on April 16, 2011, on page C1 of the New York edition.