Please Touch CEO on Getting Out of Debt and Into Bankruptcy
After two long years, Lynn McMaster couldn’t help but breathe a sigh of relief last night.
The Please Touch Museum, where McMaster serves as CEO, finally settled the $60 million bond debt hanging over its head like a black cloud. (It’s getting out of the deal for just $11 million.) Finally questions about whether the beloved children’s museum will close or move appear to be answered. It’s going to stay at its palatial space at Memorial Hall in Fairmount Park as it goes through Chapter 11 bankruptcy.
But the next six months are crucial. The museum is embarking on a $10 million fundraising campaign to help pay for the debt restructuring and have money left over to bolster its exhibits.
How does Please Touch plan to raise $10 million in six months when it didn’t even raise $1 million in donations during all of 2014?
“When it becomes known publicly that an organization has more debt than it can possibly pay — a big black hole of debt — donors are reluctant to contribute because they don’t want to put money into an organization that is doomed to fail,” said Larry McMichael, chairman of Dilworth Paxson, the law firm working with Please Touch. “Once the debt is solved, donors open up their wallets. The museum is not being the least bit unrealistic in expecting the community to rally now that there’s good news.”
The settlement doesn’t mean the museum needs to come up with $11 million by March. Instead it requires a one-time cash payment of $8.25 million because the bondholders have retained $2.75 million, said McMichael. Since the museum already paid bondholders $2.5 million, the actual number owed after the settlement is $5.75 million, he said. So even if its $10 million fundraising effort falls short, it could still satisfy the debt. If it falls dramatically short, the whole arrangement will need to be changed.
“The groundswell of support from early conversations with the donor community makes us very encouraged that we can hit our targets and achieve a positive outcome,” said McMaster, who called this campaign “wholly different” from any the museum has run in the past.
McMaster said solving the debt issue has energized the staff and board, and created enthusiasm in the building. She even said the museum will be hiring fundraising staff, but did not say exactly how many.
“It takes a village to do this and we’ve got a very engaged board that’s committed to the success of this campaign,” she said. “We’ve changed our development strategy to build relationships with new donors. That work has already started.”
Aside from paying back its debt, the remaining money gained in the fundraising campaign will go toward a reserve fund and new exhibits and programming.