“I can confidently say that the fate and future of this museum have been significantly secured,” Mayor Gavin Newsom said.
The proposal, coordinated by City Attorney Dennis Herrera, City Controller Ben Rosenfield and City Public Finance Director Nadia Sesay, includes four parts.
The agreement begins with the museum creditor, JPMorgan Chase, extending its term and adjusting the rate of the bonds issued.
City Controller Ben Rosenfield said that the new fixed rate of 4.6 percent comes as a welcome replacement to the previous variable rates, which increased over time.
“The plan is free of the financial bells and whistles that created the challenge,” Rosenfield said.
Over the last few months, the Asian Art Museum Foundation–a private fundraising branch of the facility – found itself unable to repay bonds and faced the expiration of a letter of credit necessary to sustain the former financing arrangement. The institution’s debt had amounted to $120 million.
Bond rating agencies expressed concern over the foundation’s ability to adhere to their contracts, Rosenfield said.
“When we were first made aware of the funding challenges, the city family came together quickly to solve them,” Newsom said.
According to director Jay Xu, the Asian Art Museum displays more than 17,000 pieces of artwork created over the last 6,000 years.
Newsom called it “the finest collection anywhere in North America.”
The city also worked with the creditors to negotiate a return of $21 million of the principle loans to the foundation, which lowers the outstanding debt to $99 million – a 17 percent reduction.
Further, the foundation has promised to launch a three-year fundraising campaign, pledging to raise at least $20 million.
“People think that we haven’t been fundraising,” foundation president Akiko Yamazaki said. “But we do it every year. We might need to refocus our efforts, but really the collapse of the market is to blame for the mess.”
If the foundation does not have sufficient funds to repay its debt, the city has agreed to front the payments by means of an assurance contract to replace the existing MBIA debt insurance policy.
“Obviously, it’s going to take lots and lots of hard work,” former mayor Willie Brown said.
“But, frankly, it’s a joy to be part of maintaining and hopefully perpetuating one of the flagship institutions of this city.”
Kristen Peters, Bay City News