(Recasts; adds details on completion of collection bargaining
agreements with union)
June 13 A settlement has been reached in
Detroit's historic bankruptcy case over the treatment of
unsecured limited-tax general obligation bonds, U.S. Bankruptcy
Court mediators announced on Friday.
Details of the settlement, reached between the city and two
unnamed parties that either own or insure "a large majority" of
the bonds, are in "the final documentation process," and were
not disclosed, according to the mediators' statement.
In its latest debt adjustment plan, Detroit said creditors
would only recover an estimated 10 percent to 13 percent on
about $163.5 million of limited-tax GO bonds the city had
labeled as being unsecured. Payment on most of the debt was
guaranteed by Ambac Assurance Corp, according to
Earlier this month, Ambac and mutual fund Black Rock
Financial Management were ordered into a mediation session with
the city that was to take place on Thursday.
"The settlement recognizes the unique status and niche of
(limited-tax GO bonds) in the municipal finance market," the
mediators' statement said, adding that the unnamed insurer will
honor "its insurance commitments on the existing policies."
The mediators added that a few but significant disputes
remain in the case. On Aug. 14 a key court hearing will begin to
determine if Detroit's plan to adjust $18 billion of debt and
exit the biggest municipal bankruptcy in U.S. history is fair
Those disputes mostly involve bond insurers Syncora
Guarantee Inc and Financial Guaranty Insurance Co
, which have been pushing for the city to sell pieces
at the Detroit Institute of Arts to raise money for creditors.
The so-called grand bargain in the city's plan was crafted
to tap $466 million in funds pledged by philanthropic
foundations and the art museum and $195 million from the state
of Michigan to ease pension cuts for retired city workers and
prevent a sale of art work.
Kevyn Orr, the city's state-appointed emergency manager, has
reeled in settlements in recent months over the treatment of
voter-approved unlimited-tax GO bonds and with various retiree
groups and others.
On Friday, the American Federation of State, County and
Municipal Employees Council 25 - Detroit's biggest labor union -
urged city workers and retirees to vote in favor of Detroit's
debt adjustment plan, according to a statement released by the
bankruptcy court, which has set a July 11 voting deadline.
The statement said that tentative deals reached in April
giving union members protections under a comprehensive
collective bargaining agreement have been completed. Terms of
the deals were not disclosed ahead of a member ratification vote
and state approval that must be completed by June 30.
Council 25 President Al Garrett said in the statement while
the union remains "severely concerned with the way this
bankruptcy has been handled from its inception," the agreements
are the best path forward for workers and retirees.
"They simply cannot risk the further serious reductions in
pension, pay and job security if the plan, and our collective
bargaining agreements, are not approved," Garrett said.
(Reporting by Karen Pierog; editing by G Crosse and James