In an unprecedented move to shore up a private nonprofit, The City will guarantee a $99 million loan to keep the Asian Art Museum Foundation afloat.
The museum, which lays claim to one of the largest collections of Asian art outside the Far East, had been in jeopardy of shutting down because of the foundation’s troubles.
At a news conference announcing the deal Thursday, Mayor Gavin Newsom described the foundation’s financial problems as "a bump in the road in terms of the fate and the future" of the museum, a future that he said "is now significantly secured."
The world-renowned museum is owned by The City but operated by the foundation, which borrowed $120 million in 2000 to renovate its building. The loan was backed by JPMorgan Chase.
Last year, the foundation was in technical default on its loan, and JPMorgan Chase threatened to force it into bankruptcy.
City leaders stepped in to help negotiate, a role that City Controller Ben Rosenfield said was appropriate because The City owns the museum and its collections and had a stake in the foundation’s solvency.
The final result was a deal in which the bank will forgive $21 million of the foundation’s $120 million debt, and renegotiate the rate and term of the loan. Also, The City will sign an "assurance agreement" that requires the controller to seek general funds to pay the loan if the foundation cannot.
"The deal comes with some risk to The City, and my point to that is that that risk needs to be weighed against the much more real and immediate risk that the foundation could cease to exist," Rosenfield said.