Joel R. Glucksman
Partner
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One year after his appointment as Detroit Emergency Manager, Kevyn Orr is confident that Detroit will bounce back. According to Reuters, Orr predicts that the city’s plan to get out from under its $18 billion of debt will win court approval by this fall. There are a number of obstacles still standing in the way, including a vote by the city’s pensioners and a legal dispute over credit swap agreements, but Orr believes these obstacles can be overcome.
“We hope to have the hearing completed by the middle of August or so,” Orr said during a March 24 event on Detroit’s bankruptcy filing at the Manhattan Institute, according to the news source. “The court would either approve or disapprove – we hope it’s going to approve – that plan after the hearing in August, hopefully by the fall.”
Many of the benefits of the city’s Chapter 9 filing won’t be seen by its residents until after the hearing, according to Detroit Free Press. However, the city is no longer “borrowing from the pension funds and calling that revenue when it’s actually debt at 8 percent,” said Orr in an interview.
“Contrary to some of the predictions when we started out that this (bankruptcy) was going to wreck the city, au contraire, we have lenders that are willing to do business with the city even now on competitive rates and terms,” Orr told the news source. “That is helpful for the city. We are paying our bills on time for the first time in a long time.”
U.S. bankruptcy Judge Steven Rhodes has already rejected two of Orr’s proposals on the ground that they were too expensive for Detroit to afford, according to The Wall Street Journal. This proposal may be looked upon more favorably, but will still probably face opposition from Syncora Guarantee, a company that insured some of the city’s pension debt.
“They have an opportunity to file their objection and the court is going to hear this,” said Orr. “Hopefully third time is a charm.”
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