Karen's Feed
Feb 5, 2014

Illinois to sell $1 bln bonds, but investor concerns linger

CHICAGO, Feb 5 (Reuters) – A looming revenue decline, heaps
of unpaid bills and multiple lawsuits hang over Illinois’
planned $1 billion bond sale on Thursday, though the
fiscally-challenged state’s recent pension reform law may afford
it a modest break on borrowing costs.

Though it still pays more than any other state, Illinois saw
its 10-year borrowing premium slip to 120 basis points over
top-rated municipal bonds in recent weeks, down from more than
170 basis points late last year.

Feb 1, 2014

Detroit files lawsuit seeking to void pension debt

Jan 31 (Reuters) – Detroit on Friday filed a lawsuit in U.S.
bankruptcy court seeking to invalidate $1.44 billion of debt
sold to fund public worker pensions – a move that also could
void the ill-fated interest-rate swaps contracts that were a
factor leading Detroit into bankruptcy.

The lawsuit contends the city and its retirement systems
violated Michigan law when they set up “sham” service
corporations and funding trusts to facilitate the debt sales in
2005 and 2006. All other contracts or obligations connected to
the debt are also void, the lawsuit claims.

Feb 1, 2014

Detroit sues retirement funds to void pension debt

By Karen Pierog

(Reuters) – Detroit on Friday filed a lawsuit in U.S. bankruptcy court seeking to invalidate $1.44 billion of debt sold to fund public worker pensions – a move that also could void the ill-fated interest-rate swaps contracts that were a factor leading Detroit into bankruptcy.

The lawsuit contends the city and its retirement systems violated Michigan law when they set up “sham” service corporations and funding trusts to facilitate the debt sales in 2005 and 2006. All other contracts or obligations connected to the debt are also void, the lawsuit claims.

Jan 30, 2014

Powerful Illinois House Speaker pushes corporate tax cut

CHICAGO (Reuters) – With big Illinois state income tax increases set to partially expire in 2015, the Democratic head of the state’s House of Representatives on Thursday introduced a bill to permanently reduce the corporate tax rate.

The cut proposed by House Speaker Michael Madigan would reduce revenue to the state treasury by $1.5 billion in the fiscal year beginning July 1. It would set the corporate income tax rate lower than it was before a temporary increase was imposed in 2011, when Illinois also imposed a steep hike in the personal income tax rate. The tax increases were aimed at paying down the state’s huge backlog of unpaid bills.

Jan 20, 2014

Analysis: Gambling revenue at heart of Detroit’s dilemmas, new and old

CHICAGO/DETROIT (Reuters) – For Detroit, the road in and out of U.S. bankruptcy court is paved with casino money.

An economic lifeline, wagering tax revenue from the city’s three casinos is at the heart of the bankruptcy plan submitted by Emergency Manager Kevyn Orr, and it is behind the surprise rejection of a deal with banks last week that has thrown a wrench into Detroit’s route and timing to recovery.

Jan 20, 2014

Gambling revenue at heart of Detroit’s dilemmas, new and old

CHICAGO/DETROIT, Jan 20 (Reuters) – For Detroit, the road in
and out of U.S. bankruptcy court is paved with casino money.

An economic lifeline, wagering tax revenue from the city’s
three casinos is at the heart of the bankruptcy plan submitted
by Emergency Manager Kevyn Orr, and it is behind the surprise
rejection of a deal with banks last week that has thrown a
wrench into Detroit’s route and timing to recovery.

Dec 4, 2013

Illinois lawmakers pass long-awaited pension reform

SPRINGFIELD, Illinois (Reuters) – Illinois’ Democratic-controlled legislature on Tuesday passed a landmark pension reform bill, choosing to address the state’s crumbling finances over strong public labor union opposition to cuts in retirement benefits.

The bill addresses problems that have built up over decades in the nation’s worst-funded state pension system, which is underfunded by $100 billion. The vote comes despite union threats to challenge pension reform in state court, based on claims it would violate a state constitution provision that guards against cuts to pension benefits.

Dec 3, 2013

Illinois lawmakers to vote Tues on long-awaited pension reform

CHICAGO, Dec 3 (Reuters) – Illinois legislators will gather
at the state capitol on Tuesday to decide whether the nation’s
worst-funded state pension system is finally ready for reform.

Following years of discussion and study, previous reform
measures that provided limited improvements or failed to pass,
and numerous downgrades of the state’s credit ratings, the
answer lies with the Democrat-controlled legislature. At a
special, one-day session on Tuesday, lawmakers will take up a
bill that raises retirement ages, reduces and suspends
cost-of-living increases for pensions, and limits the salaries
on which pensions are based.

Nov 19, 2013

Detroit could pay higher loan rate, unsealed letter shows

By Tom Hals and Karen Pierog

(Reuters) – Detroit could end up paying almost twice as much in interest as previously disclosed on a $350 million loan arranged by Barclays Capital, according to a fee letter made public on Monday after a judge ordered it unsealed last week.

U.S. Judge Steven Rhodes on Thursday thwarted efforts to keep the cost of a debtor-in-possession (DIP) financing under wraps, noting the so-called fee letter was subject to Michigan’s Freedom of Information Act.

Nov 8, 2013

Bond insurers sue Detroit over October 1 bond default

By Karen Pierog

(Reuters) – Two insurance companies that guaranteed payments on Detroit’s voter-approved general obligation bonds sued the city in U.S. Bankruptcy Court on Friday over its October 1 default on $9.37 million in payments due to bondholders.

National Public Finance Guarantee Corp, the public finance subsidiary of MBIA Inc, and Assured Guaranty Municipal Corp claimed that Detroit’s use of property taxes levied exclusively to pay off the bonds for operating expenses violated Michigan law.