Five years after moving into a larger, more expensive home, the Please Touch Museum has stopped making payments on its bond debt, triggering a process that leaders say could result in bankruptcy.
On Tuesday, the board of the children's museum approved a decision to forgo the current $2 million payment, putting the museum in default. The goal, said interim president/CEO Lynn McMaster, is to renegotiate with bondholders the terms on $60 million in bonds the museum issued to fund its renovations of Memorial Hall after fund-raising stalled.
McMaster declined to identify a specific amount by which the museum was seeking to reduce the debt, citing negotiations ahead with bondholders. The museum's bankruptcy attorney, Gretchen Santamour of Stradley Ronon Stevens & Young, said a number of potential deals could be reached, from "a lump sum early on and some debt over time, or a forgiveness of a portion of the bond. It really depends on what the majority think is the most attractive option," she said.
Failing a deal, the museum might choose to file for Chapter 11 reorganization, or seek to merge with another group. McMaster said she did not immediately know of any potential merger partners. "We've just started to consider all of this, we don't have any prospects right as of this minute."
Absent the alleviation of debt pressures, the museum would hit a crisis several years down the road, she said. Museum officials have publicly maintained that the debt load was manageable, even as recently as several months ago. Asked what has changed, McMaster said:
"I don't know if anything has changed specifically in the last few months, although there has been an ongoing effort to address the debt in the last several years."
McMaster stepped in as interim CEO on Sunday when Laura Foster departed after five years in the job. Foster had succeeded museum longtime chief Nancy Kolb, who retired after the move to Memorial Hall.
The museum's debt balance is currently $60.6 million, an amount that includes substantial interest debt, Santamour said.
Debt payments, $3.85 million this year, escalate annually, topping out at $5.65 million by 2036. The total amount paid by that time under the current debt service plan, combining principal and interest, would come to $128,231,730, according to the original 2006 offering documents.
Most recently, the museum's strategy for covering debt was an announced fund-raising campaign: $20 million to cover debt payments for a number of years, $3 million to fix its leaky dome and repair moisture damage to plaster and marble floors, $3 million for new and refurbished exhibits and a new garden, and $4 million toward a board-restricted fund and future building maintenance.
That campaign will go on as negotiations with bondholders progress, said McMaster.
The museum's annual budget tripled when it moved from its Center City location on 21st Street to Memorial Hall in Fairmount Park, but annual giving stayed the same, museum board chair Sally Stetson has said.
No immediate crisis triggered the decision to stop making payments now, said McMaster. "Our goal is to allow the museum to preserve its mission, that we continue to provide a topflight experience for families. That's why we are getting out in front of it right now."