Karen's Feed
Apr 15, 2014

Detroit police, fire retirees reach pension deal: court mediators

By Karen Pierog

(Reuters) – Detroit reached its first deal with a retired workers group on Tuesday over pension and healthcare benefits and was close to a deal with its two pension funds, giving a major boost to the city’s plan to exit bankruptcy in October.

Momentum for the city’s plan to adjust its $18 billion debt burden was building after Detroit last week won court approval for a crucial settlement over interest rate swaps and reached an agreement with bond insurance companies over the treatment of voter-approved general obligation bonds.

Apr 10, 2014

Creditor cramdown could imperil money pledged for Detroit retirees

NEW YORK, April 10 (Reuters) – Kevyn Orr, Detroit’s
emergency manager, said he has lined up support from enough
creditors of the bankrupt city to force concessions from others,
but doing so would risk the loss of more than $800 million in
funding from the state of Michigan and philanthropic
foundations.

A deal announced Wednesday with bond insurance companies,
along with a previous deal with two investment banks, could give
Orr authority under Chapter 9 of the U.S. municipal bankruptcy
code to force other creditors to accept payment terms. But a
so-called cramdown would violate a pre-condition of Orr’s “grand
bargain” with the state and foundations, which have pledged $816
million to ease pension cuts for retired city workers.

Mar 4, 2014

Detroit asks bankruptcy court to approve new deal to end swaps

By Karen Pierog

(Reuters) – Detroit on Monday said it reached an agreement with two investment banks to end costly interest rate swaps, a move that could give Detroit access to revenue from casino taxes and give it leverage in efforts to win court approval for the city’s plan to restructure its debt.

The deal to terminate the swaps, which were used to hedge interest rate risk on some Detroit pension debt, would cost the bankrupt city just $85 million. That is a steep drop from two previous deals that carried price tags of $165 million and around $230 million, respectively and were rejected by U.S. bankruptcy Judge Steven Rhodes as being too expensive for the broke city.

Mar 1, 2014

Detroit creditors want more time to vet city’s bankruptcy plan

By Karen Pierog

(Reuters) – Detroit faces a long legal fight over its valuable art collection and other key matters in its historic bankruptcy case that make it imperative to push back the start of a trial on the city’s debt adjustment plan, a bond insurer argued on Friday.

In a filing in U.S. Bankruptcy Court, Syncora Guarantee Inc warned that lawsuits will be filed over the Detroit Institute of Arts’ collection, which the city is not selling at this point to help pay its $18 billion in debt.

Feb 27, 2014

Chicago not poised to go the way of Detroit -S&P

CHICAGO, Feb 27 (Reuters) – Standard & Poor’s Ratings
Services posed the question on Thursday that has been lingering
in the minds of many in Chicago: Will significant budget
pressures put the city on the same path that led Detroit into
bankruptcy?

The answer, contained in a report by the credit rating
agency, is no.

“We believe that Chicago’s growing economy and taxing
flexibility provide it with the resources to avoid a fate
similar to Detroit’s should it capitalize on this flexibility
and remain on course,” the report concluded.

Feb 26, 2014

Analysis – Detroit uses stick and carrot to sell bankruptcy plan

By Karen Pierog and Tom Hals

(Reuters) – In his effort to keep Detroit on a fast track to end its historic bankruptcy, the city’s emergency manager has cobbled together a plan to cajole or even threaten key creditors to accept cuts he laid out in federal court filings last week, or else face even deeper losses if they do not cooperate.

Kevyn Orr has every incentive to keep the parties in line. If he wins broad agreement with creditors, the city will gain access to some $815 million pledged by foundations and others to ease the bankruptcy blow on city retirees. Even so, his plan for dealing with Detroit’s $18 billion of debt may drive a wedge between city workers and retirees and their unions and pension funds.

Feb 26, 2014

Detroit uses stick and carrot to sell bankruptcy plan

By Karen Pierog and Tom Hals

(Reuters) – In his effort to keep Detroit on a fast track to end its historic bankruptcy, the city’s emergency manager has cobbled together a plan to cajole or even threaten key creditors to accept cuts he laid out in federal court filings last week, or else face even deeper losses if they do not cooperate.

Kevyn Orr has every incentive to keep the parties in line. If he wins broad agreement with creditors, the city will gain access to some $815 million pledged by foundations and others to ease the bankruptcy blow on city retirees. Even so, his plan for dealing with Detroit’s $18 billion of debt may drive a wedge between city workers and retirees and their unions and pension funds.

Feb 22, 2014

Detroit’s bankruptcy plan spares pensions from deepest cuts

By Karen Pierog

(Reuters) – Detroit’s blueprint for dealing with $18 billion in debt and emerging from municipal bankruptcy requires cuts to worker pensions and even deeper cuts for bondholders, setting the stage for a new round of negotiations and court challenges.

The potentially precedent-setting plan the city filed in U.S. Bankruptcy Court on Friday would cut retired worker’s pensions by up to 30 percent while owners of bonds deemed unsecured would lose up to 80 percent of their investment.

Feb 21, 2014

Detroit files plan to resolve record bankruptcy

Feb 21 (Reuters) – Detroit filed a much-anticipated
blueprint for dealing with $18 billion of debt in U.S.
bankruptcy court on Friday that includes cuts of as much as 80
percent for some unsecured bondholders.

The city’s plan of adjustment, which the court must approve
before Detroit can emerge from the biggest municipal bankruptcy
in U.S. history, also calls for a $1.5 billion program to
improve essential services and public safety over 10 years.

Feb 19, 2014

Detroit bankruptcy judge to hear crucial bond dispute

Feb 19 (Reuters) – For Detroit, the long and winding road
out of the largest-ever U.S. municipal bankruptcy may get a bit
straighter on Wednesday.

First, U.S. Bankruptcy Judge Steven Rhodes will consider
litigation over whether Detroit’s pledge of tax revenue to pay
off voter-approved bonds is a binding obligation or merely a
promise that the broke city cannot keep.