Joel R. Glucksman
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Detroit decries creditors' request to delay bankruptcy plan
Author: Joel R. Glucksman
Date: April 11, 2014
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Detroit is expected shortly to file an amended bankruptcy restructuring plan, which is anticipated to add details to emergency manager Kevyn Orr’s first version of the plan, according to Detroit Free Press. The amended plan will allow the city to leave bankruptcy with significantly less debt and to invest $1.5 billion over the next decade in blight removal, police and fire protection, and other essential needs.
The new plan may also provide new terms for creditors, as well as adjusted financial projections, according to the news source. New details about the terms of this ‘grand bargain,’ which involves a pledge of $815 million from foundations, the state government and the Detroit Institute of Arts to reduce pension cuts and keep the museum from selling its artwork, are also anticipated. The news source notes, however, that significant changes to the original plan are not expected.
Even so, Syncora Guarantee and Syncora Capital Assurance, which insure or have exposure to more than $600 million of Detroit’s debt, have requested an additional two weeks to review the amended disclosure statement for the new plan, according to The Detroit News. U.S. Bankruptcy Judge Steven Rhodes set a deadline of April 3 for creditors to file objections to the proposal, which Syncora argued only gives creditors 48 hours to review and object to the statement.
Detroit accused the creditor of employing a “scorched earth litigation strategy” to delay the city’s bankruptcy exit, the news source reported.
“Although it dresses up its request for relief as a plea for the preservation of due process, Syncora merely seeks more disruption and delay,” Detroit bankruptcy attorney Heather Lennox wrote, according to The Detroit News. ” … Syncora’s argument that the potential for relatively modest revisions to objections that parties have had nearly 40 days to prepare constitutes a deprivation of due process is not credible and generates far more heat than light.”
City spokesman Bill Nowling said that the city is confident that Judge Rhodes will keep to the court’s original April 3 schedule, the news source explained.
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