The Overture Center for the Arts’ financial lenders are threatening the foreclosure of the center if the debt the Overture Development Corp. owes is not repaid soon.
The three banks that loaned the Overture Center money for its construction wrote a letter to the two organizations responsible for its construction, the ODC and the Support Organization for Madison Cultural Arts District, demanding they sign a forbearance agreement to “resolve the outstanding debt.”
However, there is question as to whether the banks — JP Morgan Chase, the U.S. Bank and M&I Bank — liquidated the Overture Center’s trust fund properly when they sold its assets, Tom Carto, president of the Overture Center, wrote in an e-mail to The Badger Herald.
“They are asking ODC to sign a forbearance agreement indemnifying them, and ODC has declined to do so,” Carto said. “That may have spurred this most recent posturing.”
Rob Chappell, spokesperson for the Overture Center, said the banks sold the liquidated assets for $88.4 million instead of the potential $93 million they were worth.
He added the ODC is now asking what happened to the value of the stocks and bonds, but the banks are not providing an explanation.
By asking the ODC and SOMCAD to sign the forbearance agreement, the banks are asking for immunity from being sued, according to Chappell.
Attorney Ann Ustad Smith, who represents the three banks, said she “is not in a position to comment at this time.”
The construction of the Overture Center was funded by a $205 million grant from philanthropist W. Jerome Frautschi. Of the total grant, $105 million was placed into a trust fund managed by MCAD and overseen by SOMCAD. The fund was created with the intention to pay back the center’s construction debt.
When the trust fund was liquidated, the ODC proposed a plan to repay the $28 million construction debt.
The ODC asked MCAD to put all of its reserves — amounting to $4 million — toward repaying the debt, and MCAD complied.
However, when the city was asked to help pay $12 million, which equates to 43 percent of the debt, Mayor Dave Cieslewicz refused to use the city’s and taxpayers’ money.
According to Carto, the banks were asked to “forgive” $8 million but also refused the proposal. He added $27.7 million in debt needs to be paid and stakeholders are currently discussing solutions concerning the balance due.
Carto added Frautschi will continue making debt payments until next year. Afterward, MCAD will take over the payments until the end of 2011.
Chappell said although there is still money in the Overture Center’s reserves, the banks will not accept it. However, the money is legally dedicated to debt service until Dec. 31, 2011.
Chappell added the banks asked for a meeting with George Austin, president of ODC, who has met with the banks a few times over the last couple of months.
“I would image they would have to continue communicating,” Chappell said. “Not talking is not an option.”
CORRECTION: Due to a headlining error, the Feb. 5 article titled “Banks threaten to close Center” may have misled readers to believe the Overture Center is in danger of closing, when JP Morgan Chase is only threatening to foreclose on the building. We regret the error.
