Please Touch Museum, driven into bankruptcy by $60 million in debt used to pay for its 2008 move from Center City to Memorial Hall in Fairmount Park, won a judge's blessing Wednesday to shed that debt for a payment of $11.25 million.
"It is a great burden lifted for the organization," said Patricia Wellenbach, who had been an adviser to Please Touch since November and will become chief executive when it formally exits bankruptcy, likely early next week.
Wednesday's hearing was a breeze and left U.S. Bankruptcy Judge Jean K. FitzSimon with a smile on her face. "I'm very happy to confirm this plan and allow you to get on with your business," she said.
The tax-exempt children's museum, which will celebrate its 40th anniversary this fall, raised $5.75 million from donors and the remainder out of reserves from the museum's 2006 bond sale.
In all, the museum has raised $7.86 million since filing for bankruptcy protection in September. The William Penn Foundation provided $1.3 million, the Neubauer Family Foundation $1 million, and the Hamilton Family Foundation $350,000. The largest donation was $3.25 million from an anonymous individual.
To persuade foundations and philanthropists to contribute, Wellenbach had to sell them on the possibility of rejuvenating the institution for new generations of children.
"We had to make it not about the debt," she said. "We had to make it about the future and what the possibility and potential was."
Wellenbach's plans include "responsibly" bringing digital experiences into the museum; making the museum more inclusive by, for example, becoming bilingual with signs in English and Spanish; and increasing the "age-out" point from 7 years old to 10 or 11, she said.
Those changes will help eliminate the operating losses the museum still faces for the next year, Wellenbach said.
As part of the bankruptcy resolution, Please Touch will pay about $150,000 to lawyers and other professionals involved in the bankruptcy and $380,000 to unsecured creditors.
At the beginning of February, Please Touch owed $1.1 million to unsecured creditors, more than half of it to the city. The City of Philadelphia and some long-term vendors agreed to accept less than they were owed to help the museum out of Chapter 11.
Allied-Barton Security Services L.L.C., for instance, agreed to accept 20 percent less than it was owed, taking a cut to $37,071 from $46,267, according to a court filing.
Brulee Catering, a Philadelphia company that has catered special events and operated the Please Taste Cafe since the museum opened, forgave its entire claim of $14,426.
"We believe in the mission of the Please Touch Museum and wanted to be part of the solution of them exiting bankruptcy, so we felt that we could afford to forgive that debt," said Barry Gutin, principal and cofounder of Brulee Catering.
The city agreed to give the museum a break on a $638,477 parking-tax claim, reducing it 16 percent, to $538,022. The tax had accumulated for years. At the same time, the city also agreed to provide a $550,000 grant.
"We wanted to make sure that the institution got through this. We also wanted to make sure the tax was paid," said Rob Dubow, the city's chief financial officer.
The city did not give ground on Please Touch's 45-year lease of Memorial Hall, a National Historic Landmark built as an art gallery for the 1876 Centennial Exhibition.
At the outset of the bankruptcy, Please Touch officials hoped to turn over maintenance and repairs of the building to the city, but that did not happen.
In the 2014 fiscal year, Please Touch spent $1 million on maintenance and $561,034 on utilities, its latest audited financials showed.
The city also owns buildings occupied by the Philadelphia Museum of Art, but under that deal the city paid an estimated $3.25 million in utilities in the year ended June 30, plus unspecified capital costs, according to the Art Museum's audited statement.
Wellenbach said she agreed with the decision not to tear up the lease as part of the bankruptcy.
She said she will attempt to tap historic preservation grants to supplement the money the museum is required to put into a maintenance fund.
"I don't see the lease as a problem. I see the building as a challenge and an opportunity," she said.