How the Detroit Opera House staved off bankruptcy by raising $7.5 million in 20 weeks
In the early morning hours of the February 1, 2012, Rick Williams, chairman of the Michigan Opera Theatre, woke up in a panic. The Detroit Opera House was $18 million in debt, largely because of the construction of 770-space parking deck. What’s more the money was due in four months, and a repayment plan adopted before the holidays had come up empty.
“To say it was a high-wire tension act balancing our standing before the world, the community, and our patrons would be an understatement,” says Williams, managing partner of Williams Williams, Rattner & Plunkett, a law firm in Birmingham.
A financial team formed from a handful of board members and outside counsel had pursued a tax increment-financing plan, but the effort proved to be unworkable. “I woke up at 2 o’clock in the morning and said “Damn it, we can’t let this happen;” Williams recalls.
Taking the lead, Williams and David DiChiera, MOT’s founder and general director, worked the phones, reached deep into their respective contact lists, and hit the road looking for donors. “We were like Siamese Twins,” William says. “David would provide the vision and I would explain our financial challenges.”
Had the debt come due 20 years earlier, Williams would have contacted the local presidents of the respective banks they knew and worked out a deal. But due to a wave of mergers and consolidations in recent years, many local banks have either moved or had been acquired by other financial institutions.
“The frustrating element was that we wound up in the workout department of the lenders, and their job was to retire the debt regardless of circumstances,” Williams says. “The first thing was to deal with a $1.5-million swap that was financial instrument used to hedge against interest rates should they rise. One of the banks took that back.”
The next step was securing a $5 million loan form Northern Trust in Bloomfield Hills. Following that, Williams, working with JPMorgan Chase & Co. in Detroit, the lead bank in the lending consortium fashioned an agreement stating that if MOT could raise $7 millions of the $18 million debt (including the $1.5-million swap). The consortium included Comerica Bank, Bank of America and PNC Bank.
With the $5 million loan from Northern Trust in hand, MOT set a minimum goal of raising $6 million to reach the new $11 million target. Remarkably, they wound up bringing in $7.5 million. How? Key to the effort was raising a lead gift of $1 million – a move that provided assurances to other donors – from the William Davidson Foundation.
Davidson’s son, Ethan, a foundation board member, says his late father, who owned the Detroit Pistons and Guardian Industries, was keenly supportive of anchor institutions in the arts, health care, and education. “To draw major talent to our region, be it business or otherwise, you need top notch institutions, and we feel the Detroit Opera House is one of those key anchors you need to compete with New Your or Chicago,” he says. “If you’re going to expand a business Michigan is a great place to do that plus you have great neighborhoods, culture, the arts, and world-class universities. That was my father’s vision, and we will preserve that.”
From there, Williams and DiChiera were off and running. Meeting with dozens of foundations and individual donors, the pair gained significant traction, but then hit a roadblock. Some of the foundation boards were scheduled to hold their quarterly meetings in June, and needed more time. Then, working with Barry Rourke from JPMorgan’s workout department, Williams received a 30-day extension on the loan, giving him until June 30.
“That extension meant everything to us,” DiChiera says. “I know we wouldn’t have made our goal without it. As Rick and I went from meeting to meeting, we would give each other pep talks. And as can happen when you’re deep into a campaign like this, someone had a good idea, and in this case, it was Rick.”
In early April 2012, Williams and his wife Karen, made a personal pledge to donate $100,000, but the gift was predicated on individuals and organizations matching it. Over the course of 15 consecutive performances of The Pearl Fishers, I Pagliacci, and Swan Lake (per-formed by the Barcelona Ballet), DiChiera only would say during his opening address that an anonymous donor had provided a six-figure gift and implored audiences to collectively match it.
“I thought that if my name was attached to the gift, people would be less apt to make a donation, so we kept it anonymous,” Williams says. Reminiscent of a church service, ushers moved through the audience and collected envelopes. In the, some $250,000 was raised from 1,500 individual donors (making for an overall gift of $350,000).
While most donor campaigns focus on raising cash and pledges to be paid over time, MOT’s Preserve the Legacy campaign was different. “We had to raise cash, given our forbearance agreement, plus it helped to keep the pressure on our donors and those raising the money,” Williams says. “It was a unique approach, and some might call it dangerous, but it worked. Part of the pressure cooker, believe me.”