The Philadelphia Orchestra can pay its musicians and critical vendors _ including guest players and soloists _ while it works to emerge from bankruptcy, a federal judge ruled Wednesday.
Bankruptcy Judge Eric Frank granted a series of motions that lawyers said will allow the world-renowned ensemble to operate smoothly and continue performing while restructuring its finances.
"This is no ordinary bankruptcy case," orchestra lawyer Lawrence McMichael told the judge. "These debtors were never designed to make money. They were designed to make music."
The court hearing in Philadelphia was the first since the orchestra filed for Chapter 11 bankruptcy protection on Saturday.
The 111-year-old musical institution, one of the nation's oldest, is facing a $14.5 million deficit this year, about one-third of its $46 million annual budget, according to court documents.
Orchestra officials say they are struggling with declining ticket revenues, reduced endowment income, higher costs, decreased donations and unfunded pension liabilities totaling about $45 million.
"The economic recession, stock market declines and increasingly crowded entertainment market have all taken a toll," orchestra Chairman Richard Worley wrote in an affidavit supporting the bankruptcy filing. "However, (the orchestra) also attributes some of these declines to an aging audience and poor retention rates among new orchestra patrons."
McMichael described the orchestra as an economic engine for the city and a cultural treasure that must be preserved for future generations. He said it was possible, but unlikely, that the institution would run out of cash in early May without immediate action.
Orchestra officials are ready to face the music and have "the seed of a plan" to get back on sound fiscal footing, McMichael said.
"Things have to change and they're going to change," he said. "It's important for all of us that we do this right."
The orchestra filed for bankruptcy Saturday with its two affiliates, the Academy of Music and Encore Series Inc., which sponsors concerts by Peter Nero and the Philly Pops.
Despite its money woes, the orchestra has announced a full slate of concerts for 2011-12. But officials have not announced a Pops schedule, leading Nero's personal attorney to file an injunction requiring the orchestra to honor Nero's contract and sponsor and promote Pops performances next season. The injunction has been stayed pending the bankruptcy proceedings.
Nero's attorney, Paul Rosen, said after the hearing Wednesday that his client and the Pops are being treated like "an orphan stepchild."
McMichael said he expects the two sides will resolve the matter amicably.
Bruce Simon, an attorney representing the musicians' union, told the judge the players still believe the bankruptcy move was a mistake and unnecessary, but will work with orchestra officials toward a better future.
The filing is an apparent first in recent history for a major U.S. orchestra.