The start of a critical hearing on Detroit's plan to adjust $18 billion of debt and exit bankruptcy will be delayed by one week to Aug. 21, a federal judge ruled on Tuesday.
U.S. Bankruptcy Court Judge Steven Rhodes rejected a request by city creditor Syncora Guarantee Inc to postpone the hearing until Sept. 29, but said in his order that the bond insurer had demonstrated the need for a limited delay.
Syncora, which has $400 million at stake in the case, mainly from insuring Detroit's debt, maintained that a 45-delay was justified because full documentation of Detroit's settlements with some creditors was lacking. Syncora said its ability to prepare for the hearing was "significantly prejudiced" without the documents.
The company also noted in a court filing on Monday that the city had just filed a revised plan on Friday containing "significant changes" that could have a materially adverse effect on Syncora's potential recovery in the case.
The fifth revision of Detroit's plan removes any settlement over $1.4 billion on certificates of participation sold in 2005 and 2006 to boost funding for the city's two retirement systems. Syncora and Financial Guaranty Insurance Co are on the hook for paying off the debt, which they insured, and the two have emerged as the major hold-outs in the case.
Detroit has asked the bankruptcy court to void the pension debt. The newest version of the plan sets up a litigation trust that would reward certain creditors with bigger recoveries should the debt be invalidated.
Rhodes' schedule still envisions a hearing that could extend until Sept. 23, the same end date he included in a previous order that had the hearing starting on Aug. 14. Last week, the judge suggested that the 98 hours each he allotted to the plan's supporters and opponents could be shortened given recent settlements between Detroit and some of its creditors.
(Reporting by Karen Pierog and Lisa Lambert. Editing by Andre Grenon)