New York City Opera Files for Chapter 11 Bankruptcy

The New York City Opera filed for Chapter 11 bankruptcy protection last week.  City Opera had been continuously operating for over seven decades.

The bankruptcy filing came after an effort in September to raise additional funding fell short of its $7 million goal.

“New York City Opera did not achieve the goal of its emergency appeal,” noted Risa Heller, a spokesperson for the opera, before the bankruptcy filing.  “Today, the board and management will begin the necessary financial and operational steps to wind down the company, including initiating the Chapter 11 process.”

The fund-raising effort raised only approximately $2 million.

Court Documents Show Endowment Balance Almost Exhausted

Court documents revealed that at least on paper the opera is solvent.  The opera listed assets of over $7.5 million and liabilities of only just over $5.5 million.  The assets include donation pledges and other receivables the opera has not yet received, as well as an endowment fund.

However, City Opera’s endowment has a balance of only $5 million.  The balance is no longer sufficient to generate the income City Opera’s needs to continue operations.

“Because of [City Opera’s] lack of liquidity, pension obligations, and the many other issues listed [in the bankruptcy filings, City Opera] made the difficult but necessary decision to file for Chapter 11 protection,” noted George Steel, City Opera’s general manager.

The largest creditors of the opera include its pension fund as well as City Ballet.

City Opera has cancelled all performances for the remainder of the season.  The bankruptcy filing included a petition to refund ticket purchases for those cancelled performances.  The opera informed ticket holders that it expects the bankruptcy court to grant its request.

Bankruptcy Blamed on Mismanagement by Opera Leaders

Leaders in New York City’s performance community noted that City Opera’s leaders were to blame for the failure of the opera.

“NYCO management’s reckless decisions to move the New York City Opera out of its newly renovated home at Lincoln Center, slash the season schedule, and abandon an accessible repertoire have predictably resulted in financial disaster for the company,” noted Tino Gagliardi, president of Local 802 of the American Federation of Musicians.  “Due to egregious mismanagement and a paucity of vision, instead of reaping the benefits of a strengthening economy, this most storied of cultural institutions now lies in ruin.”

City Opera’s endowment fund had almost $50 million in 2008.  However, City Opera’s board chose to hold no performances during the 2008 through 2009 performance season so that it could renovate the Lincoln Center where the opera performed.  Then the board chose to relocate the opera after using the renovated center for only two additional seasons, instead holding performances at various venues around the city.

Without a regular venue, the opera saw revenue and donations decline.  In addition, by vacating Lincoln Center which the opera shared with City Ballet, the opera now owes the ballet $1.6 million.

“City Opera’s demise is the fault of people with a lot of money but no common sense,… [the board’s] foolish support of George Steel when the singers and orchestra unanimously had no confidence in Steel’s artistic vision,” said Alan Gordon, the National Executive Director for the American Guild of Musical Artists.  The Guild represents City Opera’s performers.

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Mark

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.