MuniLand

Reactions to Detroit’s plan of adjustment

By Cate Long
February 24, 2014

Detroit’s plan of adjustment was filed on Friday by Emergency Manager Kevyn Orr (Plan of Adjustment Disclosure Statement):

Losers:

Retirees
Unsecured bondholders
Swaps counterparties
Bond insurers

Winners:

Detroit Institute of Art (DIA)
Various foundations contributing to save the DIA
Secured bondholders
Residents of Detroit
The state of Michigan

Here is a 140-character summary:

 

Here is a summary of the proposed treatment of retirees from Amy Haimerl of Crains Detroit Business:

  • Police and fire retirees are expected to have their pensions funded at 90 percent. If, however, they approve the plan of adjustment early on, the city has offered a carrot: They would only take a 6 percent hit.
  • General retirees will see their pensions reduced by 34 percent. If they vote for the plan, the city would pay them out at a rate of 74 percent.
  • These cuts would be in place for 10 years. At that point, if the retirement systems are healthy, the reductions could be renegotiated.
  • The official retirees committee calls the plan “non-confirmable” in its current state, saying it will force 20 percent of current retirees into poverty.

Some information on the treatment of bond and swap holders:

 

 

Reactions to the plan:

Retirees:

From Crain’s Detroit Business:

Police and Fire Retirement System: ‘We think the filing of the Plan of Adjustment at this time is premature, potentially impedes the mediation process, increases litigation and other costs to all parties, and delays resolution of the bankruptcy case.’

Terri Renshaw, Official Committee of Detroit Retirees: ‘The city’s plan, if actually confirmed in its current form, would cause significant harm to retirees, their spouses and dependents. Many retirees who live on the edge will fall below the poverty line. Everyone else will see major cuts to their pension checks and health care coverage, with devastating consequences for them personally and the communities in which they live.’

 

 

 

 

Bond insurers:

 

 

 

 

Politicians:

 

 

Emergency Manager Orr and his colleagues:

 

 

 

 

 

 

 

 

 

 

 

 

Etc:

 

 

 

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