Secret Deals Fostered by Detroit Bankruptcy Trial Designed to Facilitate Perpetual Debt Enslavement to the Banks
By Steven Church and Joel Rosenblatt
Bloomberg
Sep 10, 2014
Detroit and bond insurer Syncora Guarantee Inc. reached a agreement to end their battle over the city’s $7 billion debt-reduction program that may speed the biggest U.S. municipal reorganization to a quick conclusion.
U.S. Bankruptcy Judge Steven Rhodes gave Detroit and Syncora until Sept. 15 to work out final details of the accord, which would boost the bond insurer’s recovery beyond the 10 cents on the dollar the city had offered. Until then, the trial on the fairness of the entire debt-cutting plan is on hold.
Under the settlement, the city would give New York-based Syncora new debt, renew a lease on a tunnel to Canada that the bond insurer controls, turn over a parking structure and give an affiliate of the company land for development. The agreement increases the pressure on bond insurer Financial Guaranty Insurance Co., the last major creditor still battling the city, said lawyers who are following the case but not involved.
“There’s certainly a ‘train has left the station’ and ‘last man standing’ feeling about this,” bankruptcy attorney Mark Berman said in an e-mail.
Alfredo Perez, an attorney for FGIC, told Rhodes at a hearing today that he’s having “hard time” understanding the complicated agreement.
Art Bargain
Detroit’s bankruptcy plan hinges on a bargain with philanthropic foundations and the state government. Under the deal, wealthy donors and Michigan lawmakers will shore up the city’s public pension system with more than $800 million.
As part of the bargain, the city agreed not to use its art collection to pay creditors. FGIC, which would have to cover some investor losses imposed by the plan, says the collection could be used to raise enough money to pay creditors more.
FGIC hasn’t agreed to the terms announced by the city but remains “open to good-faith settlement discussions,” the New York-based company said in an e-mailed statement.
“The latest deal reinforces our view that the city has abundant sources of incremental value available for distribution,” according to the statement. “However, the issue at hand is their willingness to distribute this value fairly and equitably -- not the presence of the value itself.”
Cutting Deals
Detroit, a city of about 700,000, filed a record $18 billion municipal bankruptcy last year, saying decades of decline left it unable to provide basic services and still meet financial obligations. Since then, Detroit Emergency Manager Kevyn Orr has cut deals with city unions, retired workers and some bondholders to pay them less than they are owed.
Yesterday morning, Mayor Mike Duggan said Detroit had resolved a dispute with suburban counties over water distribution. For a few hours, that left Syncora and FGIC as the only major opponents to the city’s bankruptcy-exit plan.
Holding out when you are the last creditor left is “incredibly difficult,” Dale Ginter, an attorney who specializes in municipal bankruptcy, said in an e-mail. “We call it the ‘confirmation freight train’ because you feel like you’re standing alone in the middle of the tracks.”
The case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).
To contact the reporters on this story: Steven Church in Wilmington, Delaware at schurch3@bloomberg.net; Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net
To contact the editors responsible for this story: Andrew Dunn at adunn8@bloomberg.net Charles Carter
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| Freedom Friday demonstration during the Summer 2014 where people marched in solidarity against water shut-offs, public assets theft and bankers' rule. (Photo: Abayomi Azikiwe) |
Bloomberg
Sep 10, 2014
Detroit and bond insurer Syncora Guarantee Inc. reached a agreement to end their battle over the city’s $7 billion debt-reduction program that may speed the biggest U.S. municipal reorganization to a quick conclusion.
U.S. Bankruptcy Judge Steven Rhodes gave Detroit and Syncora until Sept. 15 to work out final details of the accord, which would boost the bond insurer’s recovery beyond the 10 cents on the dollar the city had offered. Until then, the trial on the fairness of the entire debt-cutting plan is on hold.
Under the settlement, the city would give New York-based Syncora new debt, renew a lease on a tunnel to Canada that the bond insurer controls, turn over a parking structure and give an affiliate of the company land for development. The agreement increases the pressure on bond insurer Financial Guaranty Insurance Co., the last major creditor still battling the city, said lawyers who are following the case but not involved.
“There’s certainly a ‘train has left the station’ and ‘last man standing’ feeling about this,” bankruptcy attorney Mark Berman said in an e-mail.
Alfredo Perez, an attorney for FGIC, told Rhodes at a hearing today that he’s having “hard time” understanding the complicated agreement.
Art Bargain
Detroit’s bankruptcy plan hinges on a bargain with philanthropic foundations and the state government. Under the deal, wealthy donors and Michigan lawmakers will shore up the city’s public pension system with more than $800 million.
As part of the bargain, the city agreed not to use its art collection to pay creditors. FGIC, which would have to cover some investor losses imposed by the plan, says the collection could be used to raise enough money to pay creditors more.
FGIC hasn’t agreed to the terms announced by the city but remains “open to good-faith settlement discussions,” the New York-based company said in an e-mailed statement.
“The latest deal reinforces our view that the city has abundant sources of incremental value available for distribution,” according to the statement. “However, the issue at hand is their willingness to distribute this value fairly and equitably -- not the presence of the value itself.”
Cutting Deals
Detroit, a city of about 700,000, filed a record $18 billion municipal bankruptcy last year, saying decades of decline left it unable to provide basic services and still meet financial obligations. Since then, Detroit Emergency Manager Kevyn Orr has cut deals with city unions, retired workers and some bondholders to pay them less than they are owed.
Yesterday morning, Mayor Mike Duggan said Detroit had resolved a dispute with suburban counties over water distribution. For a few hours, that left Syncora and FGIC as the only major opponents to the city’s bankruptcy-exit plan.
Holding out when you are the last creditor left is “incredibly difficult,” Dale Ginter, an attorney who specializes in municipal bankruptcy, said in an e-mail. “We call it the ‘confirmation freight train’ because you feel like you’re standing alone in the middle of the tracks.”
The case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).
To contact the reporters on this story: Steven Church in Wilmington, Delaware at schurch3@bloomberg.net; Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net
To contact the editors responsible for this story: Andrew Dunn at adunn8@bloomberg.net Charles Carter
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