Taking Bankruptcy’s Temperature. Detroit filed suit on Friday to invalidate some complex transactions it used to finance its pensions, contending they were illegal from the very beginning. In a complaint filed in United States bankruptcy court, the city argues that deals with special entities set up in 2005 and 2006, which raised $1.4 billion, were aimed only at circumventing a ceiling on the amount of debt it could take on. It is seeking a ruling that it has no obligation to make payments on the so-called certificates of participation issued to raise the money. Continue reading


The Art of Adjusting.  Noting that time is of the essence, Detroit emergency manager Kevyn Orr yesterday released a draft plan of adjustment to major Motor City creditors, as the breakthrough we reported yesterday with the Detroit Institute of Arts appeared to open the way towards the final stage of negotiations on a massive restructuring proposal of the city’s estimated $18.5 billion in debt and liabilities which must be submitted to and approved by U.S. Bankruptcy Judge Steven Rhodes by March 1st. Continue reading


The Indelicate Art of Balancing Federalism. Michigan Attorney General Bill Schuette yesterday requested the 6th U.S. Circuit Court of Appeals render a speedy decision on whether Detroit may cut its pensions as part of the city’s plan of adjustment for emerging from municipal bankruptcy—a plan due to U.S. Bankruptcy Judge Stephen Rhodes by no later than March 1st. Continue reading


The Indelicate Challenge to the Art of Balancing. In a sign of one way the municipal bankruptcy in the Motor City could affect state and local governments across the country, Fitch rating agency analyst Amy Laskey yesterday wrote: “Fitch recognizes the delicate political situation surrounding the Detroit bankruptcy,” but warned that the new efforts by Michigan Governor Rick Snyder  which she describes as bailing out pensioners first – could mean that “actions and rhetoric that suggest bondholder rights are not an important consideration will continue to damage market perception of the state and its local governments.” Continue reading


The Delicate Challenge of Balancing. In his exhortation from the bench last Wednesday, U.S. Bankruptcy Judge Steven Rhodes exhorted the Motor City, the unions and retirees, and the city’s financial creditors to participate in productive negotiations, warning that “profound change” might be needed in pensions, health care benefits, union deals, and bank debt. Continue reading


The Fine Art of Balancing. Yesterday, in the wake of Michigan Governor Rick Snyder’s unprecedented announcement of an emerging bipartisan consensus in the legislature on an “incremental commitment to solve a problem,” which would provide for moving forward with “an investment of up to $350 million over the next 20 years in Detroit,” federal judicial mediators  issued a statement praising the state’s involvement: “The mediators wish to express their appreciation for the constructive and positive role the Governor has now agreed to play in helping resolve key issues in the bankruptcy case…We hope that the Governor’s announcement will further assist the parties in reaching as many agreements as possible which can be included in an agreed-upon plan of adjustment.” Continue reading


The Fine Art of Negotiating. Gov. Rick Snyder, joined by Senate Majority Leader Randy Richardville (R-Monroe), and House Speaker Jase Bolger (R-Marshall) yesterday afternoon announced consensus on an “incremental commitment to solve a problem,” with Gov. Snyder stating: “After careful analysis and discussions, I recommend we move forward on making an investment of up to $350 million over the next 20 years in Detroit.” The Governor made clear that such a package depended on whether or not there was a settlement, that the resources of the state would be directed to the Motor City’s retirees—especially its low income retirees, and that there be “independent fiduciary management” of the city’s pension funds.” Continue reading