No Pact, No Music for Symphony : Spring Concerts Nixed; Board to Consider Bankruptcy

Unable to agree to a contract with their musicians, San Diego Symphony officials Friday dropped plans for a special spring concert series and scheduled a board meeting for Monday to ponder the symphony’s financial options.

Friday had been the symphony association’s deadline for arranging a contract with the musicians in time for the spring series. On Thursday, the musicians’ union overwhelmingly rejected a three-year contract proposal.

Facing a total debt of almost $3.5 million and with little money likely to come in as long as there are no concerts, symphony President Herbert J. Solomon has said the board will consider filing for protection under Chapter 11 of the U.S. Bankruptcy Code.

(The $3.5-million debt includes capital and operating debts, plus the symphony’s anticipated interest on the debt over the next five years.)

Seeking relief under Chapter 11 would immediately shield the orchestra from creditors, while allowing it time to develop plans for concert seasons and a new schedule for paying off its debts.

“The question is, Does the symphony intend to continue performing? And Does filing for bankruptcy have anything to do with that?” attorney David Osias said. A partner in the commercial department of Gray, Cary Ames & Frye, Osias said that, in general, bankruptcy “may give debtors more time and opportunities to work out an arrangement with their creditors and allow them to restructure employee relationships under certain statutory conditions.”

Employee relations is the main reason there is no winter concert season this year. Because of the stalled contract talks with musicians and its financial problems, the symphony canceled its winter concert season on Nov. 11.

Bankruptcy might also block season subscribers’ requests for refunds. Since the cancellation, subscribers have requested $400,000 in ticket refunds, which the symphony was to begin paying Monday.

Bankruptcy attorney Victor A. Vilaplana said that, in a Chapter 11 reorganization proceeding, the subscribers might be classified as unsecured creditors. “Presumably those (refund requests) would all be canceled in the event of a bankruptcy,” he said. “That’s one of the advantages.”

But Vilaplana said the symphony’s agreement with the developer of Symphony Towers, a hotel and office tower complex rising around and above Symphony Hall, could prove more valuable to creditors in a liquidation than a reorganization of the symphony. Under that agreement, the symphony would share in the lease revenues from the 34-story office tower to the tune of a penny a month for each square foot of leased space. The tower is expected to be completed in 1988. The payment jumps to 2 cents after five years and could generate more than $200,000 a year for the orchestra.

In a bankruptcy reorganization, the symphony might have to prove that creditors would receive greater benefits through symphony operations than if the right to the lease proceeds were auctioned in a liquidation.