Background: A tale of two crises
In March 2020, the pandemic forced Michigan's Midland Center for the Arts to close its venues, thus eliminating a major revenue source for the nonprofit. Two months later, while still closed, the area experienced major flooding when dams broke following record rainfall. Midlands's artifacts experienced significant damage and needed immediate rescue through a process that would cost an estimated $9 million.
Solution: Leveraging an extensive network
Midland applied for a line of credit with a local bank that was unable to process the loan request due to its backlog of government Paycheck Protection Program (PPP) loans during the pandemic. The urgent need for capital forced Midland to consider liquidating assets from its investment portfolio — an unappealing option. Interest rates were very low at the time, so the cost of a loan would have been small, and Midland wanted to leave its capital invested; there was potential for a market rebound in the portfolio’s value.
SEI leveraged its extensive network of existing relationships and quickly found a bank partner that arranged for a $3 million securities-backed line of credit (SBLOC) using Midland’s investment portfolio as collateral, without incurring tax consequences.
"At a time of crisis, quickly acquiring access to capital allowed us the flexibility needed to respond to an emergency, make decisions that would help us move forward, and continue to execute on the broader strategies of our mission,” says Lynn Booms, CFO, Midland Center for the Arts.
Read more about how the museum managed these challenges in our interview with Midland Center's Terri Trotter, "The Importance of Effective Government in the Midst of Two Crises."
This information is provided by SEI Investments Management Corporation (SIMC), a registered investment adviser and wholly owned subsidiary of SEI Investments Company (SEI). Statements that are not factual in nature, including opinions, projections and estimates, assume certain economic conditions and industry developments and constitute only current opinions that are subject to change without notice. Nothing herein is intended to be a forecast of future events, or a guarantee of future results. This presentation should not be relied upon by the reader as research or investment advice (unless SIMC has otherwise separately entered into a written agreement for the provision of investment advice).
The opinions and views expressed herein are those of Lynn Booms. SEI cannot guarantee the accuracy or completeness of the information and assumes no responsibility or liability for its incompleteness or inaccuracy. Midland Center for the Arts became a client of SEI in 7/24/2012.