A federal appeals court panel heard arguments on Wednesday between Detroit and one of its last hold-out creditors over casino tax revenue, with one of the judges promising a careful consideration of the case, the Detroit News reported.
The appeal by Syncora Guarantee Inc of a July 11 U.S. District Court's ruling that affirmed Detroit's access to the money was the first case tied to the city's historic bankruptcy case to be argued in the 6th Circuit U.S. Court of Appeals in Cincinnati.
Syncora, which insures some of the city's pension debt and interest-rate swaps, had initially appealed an Aug. 28, 2013 ruling by U.S. Bankruptcy Judge Steven Rhodes that gave Detroit access to about $11 million in monthly tax revenue that the bond insurance company had tried to block.
The company claims it has a lien on the money, which had been used as collateral since 2009 to secure the swap agreements. Detroit, which entered those agreements to hedge interest-rate risk on pension debt, agreed in a settlement earlier this year to pay $85 million to the swap providers. Syncora has maintained the settlement would cause it financial harm.
U.S. Appeals Court Judge Raymond Kethledge said a provision that Syncora contended allows the money to be trapped by creditors was "fairly draconian," suggesting there should be an alternate remedy, the newspaper reported. Judge Julia Smith Gibbons, another member of the three-judge panel, did not give a time frame for a ruling but said the panel would consider the arguments "carefully," the report added.
The appeals court had initially scheduled oral arguments for Wednesday on seven other cases that appealed Rhodes' December ruling that Detroit was eligible to file the biggest municipal bankruptcy in U.S. history. But those proceeding were canceled at the request of the city and the appealing parties due to actual or pending settlements.
Judge Gibbons late on Tuesday gave all the appealing parties, which include city pension funds and unions, a Thursday deadline to inform the court if they want to dismiss their cases.
(Reporting by Karen Pierog; Editing by Dan Grebler)