Feb 28 Detroit faces a long legal fight over its
valuable art collection and other key matters in its historic
bankruptcy case that make it imperative to push back the start
of a trial on the city's debt adjustment plan, a bond insurer
argued on Friday.
In a filing in U.S. Bankruptcy Court, Syncora Guarantee Inc
warned that lawsuits will be filed over the Detroit
Institute of Arts' collection, which the city is not selling at
this point to help pay its $18 billion in debt.
Syncora, which guaranteed payments on some of Detroit's
bonds, and other creditors have pushed for the sale of art works
to raise more cash for the city to spread among its thousands of
creditors, who face steep losses in the largest municipal
bankruptcy in U.S. history.
In an effort to prevent a fire sale of art, a group of
philanthropic foundations, the art museum and Michigan Governor
Rick Snyder have pledged about $815 million to ease pension cuts
for city retirees.
Prior to those pledges, auction house Christie's in December
appraised the value of Detroit-owned works at the institute at
$454 million to $867 million. But critics of Christie's work
suggested that the appraisal of only a small slice of Detroit's
collection undervalued the art collection as a potential asset
in helping to resolve Detroit's bankruptcy.
"Given the city's odd decision to value just 5 percent of
the entire collection and its repeated failure to provide
ownership information, there will be litigation surrounding the
art and it will be time consuming," Syncora said in its
Syncora was among several creditors that requested a delay
on Friday, the deadline Judge Steven Rhodes set for objections
to his schedule that called for a trial to start on June 16.
The plan Detroit filed with the U.S. Bankruptcy Court a week
ago would result in cuts to city worker pensions and even
deeper cuts to holders of certain Detroit bonds that were lumped
into the city's nearly $12 billion pile of unsecured debt.
Retirees and pension funds argued the proposed cuts were too
deep, while bond insurers complained that bondholders were being
Some of the creditors contended the schedule did not allow
enough time to fully vet the plan, which they said was not
Syncora also noted that Detroit has yet to make headway on
the formation of a regional water and sewer authority that would
have a material effect on creditor recoveries and that
litigation is also likely over the disputed size of the city's
liabilities for pensions and retiree healthcare.
The bond insurer proposed moving the trial date on Detroit's
plan to Sept. 8.
Another group of creditors, including the city's two pension
funds, public safety unions and other bond insurers, suggested a
trial date of July 14 on the plan. The city itself proposed
moving the date to June 23.
In an unrelated action on Friday, Judge Rhodes granted
Detroit's motion to disband a committee of unsecured creditors,
citing the committee's unwillingness to participate in mediation
and the millions of dollars in professional fees the committee
would cost the city. The committee, created in December by the
U.S. Trustee, includes bond insurer Financial Guaranty Insurance
Co and the city's two pension systems, which are its biggest
At a Feb. 19 hearing, Detroit's attorneys argued the
committee was unnecessary because all of the city's major
unsecured creditors have already participated in the case,
including mediation, and have legal representation.
A separate committee formed at the city's request earlier in
the bankruptcy case to represent retired city workers cost
Detroit nearly $2 million in fees and $61,500 in expenses
between July and September, according to a report released this
month by a court-appointed fee examiner.