Banks, Bond Insurers Cut Secret Deals to Loot Detroit Assets With Federal Court Approval
Robert Snell
The Detroit News
Detroit — A holdout bond insurer that is owed about $1.1 billion and the city were ordered into closed-door negotiations in hopes of reaching a settlement that could end Detroit’s landmark bankruptcy case.
Chief U.S. District Judge Gerald Rosen, the lead mediator in Detroit’s bankruptcy case, issued the order Thursday and said negotiations start Friday and will continue every day until a deal is reached or the judge sends them home.
Several creditors were ordered to attend the private negotiation sessions Friday. They include Financial Guaranty Insurance Co. — the last major holdout creditor in the biggest municipal bankruptcy in U.S. history.
Rosen warned the parties against leaking details of the closed-door negotiations.
“All parties and counsel are reminded that all proceedings, discussions, negotiation, and writings incident to mediation are privileged and confidential, and are not to be disclosed to any third-parties,” Rosen wrote.
The order comes two days after fellow bond insurer Syncora Guarantee Inc. struck a deal with Detroit. Under the deal, the city agreed to extend a lease of the Detroit-Windsor tunnel with a Syncora-controlled firm for 20 years. Syncora also gets to lease a city-owned parking lot underneath Grand Circus Park for 30 years and a package of incentives that includes cash, according to a city term sheet released Wednesday.
In exchange, Syncora will drop its objection to Detroit’s plan to shed about $7 billion in bankruptcy court and help the city fight FGIC, which has objected to Detroit’s bankruptcy plan.
Syncora and FGIC were two of the biggest opponents in the bankruptcy trial. Both firms claim the city’s debt-cutting plan pays them as little as 6 cents on the dollar for the $1.4 billion in troubled pension debt they insured to help former Mayor Kwame Kilpatrick prop up the city's pension funds in 2005.
FGIC has claims of more than $1.1 billion — three times the size of Syncora’s. The firm’s negotiators walked out of closed-door talks with the city two weeks ago.
In a statement Wednesday, FGIC said the firm remains open to a good-faith settlement following the Syncora deal.
“The latest deal reinforces our view that the city has abundant sources of incremental value available ...,” the company said. “However the issue at hand is their willingness to distribute this value fairly and equitably...”
rsnell@detroitnews.com
(313) 222-2028
From The Detroit News: http://www.detroitnews.com/article/20140911/METRO01/309110086#ixzz3D3qbCMMy
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| National march in solidarity with Detroit on July 18, 2014. (Photo: Abayomi Azikiwe) |
The Detroit News
Detroit — A holdout bond insurer that is owed about $1.1 billion and the city were ordered into closed-door negotiations in hopes of reaching a settlement that could end Detroit’s landmark bankruptcy case.
Chief U.S. District Judge Gerald Rosen, the lead mediator in Detroit’s bankruptcy case, issued the order Thursday and said negotiations start Friday and will continue every day until a deal is reached or the judge sends them home.
Several creditors were ordered to attend the private negotiation sessions Friday. They include Financial Guaranty Insurance Co. — the last major holdout creditor in the biggest municipal bankruptcy in U.S. history.
Rosen warned the parties against leaking details of the closed-door negotiations.
“All parties and counsel are reminded that all proceedings, discussions, negotiation, and writings incident to mediation are privileged and confidential, and are not to be disclosed to any third-parties,” Rosen wrote.
The order comes two days after fellow bond insurer Syncora Guarantee Inc. struck a deal with Detroit. Under the deal, the city agreed to extend a lease of the Detroit-Windsor tunnel with a Syncora-controlled firm for 20 years. Syncora also gets to lease a city-owned parking lot underneath Grand Circus Park for 30 years and a package of incentives that includes cash, according to a city term sheet released Wednesday.
In exchange, Syncora will drop its objection to Detroit’s plan to shed about $7 billion in bankruptcy court and help the city fight FGIC, which has objected to Detroit’s bankruptcy plan.
Syncora and FGIC were two of the biggest opponents in the bankruptcy trial. Both firms claim the city’s debt-cutting plan pays them as little as 6 cents on the dollar for the $1.4 billion in troubled pension debt they insured to help former Mayor Kwame Kilpatrick prop up the city's pension funds in 2005.
FGIC has claims of more than $1.1 billion — three times the size of Syncora’s. The firm’s negotiators walked out of closed-door talks with the city two weeks ago.
In a statement Wednesday, FGIC said the firm remains open to a good-faith settlement following the Syncora deal.
“The latest deal reinforces our view that the city has abundant sources of incremental value available ...,” the company said. “However the issue at hand is their willingness to distribute this value fairly and equitably...”
rsnell@detroitnews.com
(313) 222-2028
From The Detroit News: http://www.detroitnews.com/article/20140911/METRO01/309110086#ixzz3D3qbCMMy
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