June 17 (Reuters) - Michigan Attorney General Bill Schuette on Tuesday approved a deal to protect the Detroit Institute of Arts’ (DIA) collection from being tapped to help pay the bankrupt city’s creditors.
Under the settlement, which is part of the so-called grand bargain in Detroit’s debt adjustment plan, the DIA’s assets will be transferred to a nonprofit corporation for the benefit of Detroit and state residents.
Schuette said the arrangement complies with an opinion he issued a year ago that concluded the DIA’s art collection is held in a charitable trust for the people of Michigan and no part of the collection can be “sold, conveyed, or transferred to satisfy city debts or obligations.”
The attorney general said his approval was required under the settlement. The Detroit City Council has also approved the transfer of city assets at the DIA to the nonprofit corporation.
“As required by Michigan law, the DIA Settlement continues the museum’s charitable purpose and thereby preserves Michigan’s world-class art collection for current and future generations of Michigan citizens,” Schuette said in a letter to U.S. Judge Steven Rhodes, who is overseeing Detroit’s historic bankruptcy case.
Bond insurers Syncora Guarantee Inc and Financial Guaranty Insurance Co, which face big potential losses in the bankruptcy, have been pushing Detroit to some of the DIA’s art.
The grand bargain involves $366 million pledged by philanthropic foundations and $100 million by the DIA, along with $195 million in state funds to ease pension cuts for Detroit’s retired workers and prevent art works from being sold or monetized to pay city creditors.
The deal is a key element of Detroit’s plan to adjust $18 billion of debt and exit what ranks as the biggest municipal bankruptcy in U.S. history. The city has warned that if its current and retired workers vote to reject the plan, the grand bargain would be yanked and pension cuts would be bigger.
Auction house Christie‘s, which was hired by the city last year, had estimated that the city’s share of the DIA’s collection was worth as much as $867 million.
Reporting by Karen Pierog; Editing by Leslie Adler