DETROIT, March 5 Detroit's latest proposal to
end costly interest-rate swaps is likely to be opposed by
Syncora Guarantee, an attorney for the bond insurance company
said in U.S. Bankruptcy Court on Wednesday.
"There is a likelihood there may be an objection," Stephen
Hackney, Syncora's attorney at law firm Kirkland & Ellis, told
Judge Steven Rhodes at a status hearing on the city's motion on
the swaps deal.
The city on Monday had asked the court to approve a new deal
to terminate the swaps, which were used to hedge interest rate
risk on some pension debt, at a cost to the city of $85 million.
Syncora, which insured some of the city's pension debt
associated with the swaps, as well as the swaps themselves,
fought prior deals to end the hedges, claiming that such a move
would cause it financial harm.
The bond insurer and other Detroit creditors have also
claimed that the city was affording more favorable treatment to
swap counterparties UBS AG and Merrill Lynch Capital Services.
Robert Hertzberg, an attorney at law firm Pepper Hamilton
who is representing Detroit, asked the judge to hold a March 20
hearing on the swaps deal with the city's emergency manager
Kevyn Orr testifying, but Rhodes did not immediately set a date.
He rejected two previous deals on the swaps that carried
price tags of $165 million and around $230 million as being too
expensive for the city.
The swaps soured when interest rates dropped along with
Detroit's credit rating and big termination fees owed to swap
counterparties helped push the city in July to file the biggest
municipal bankruptcy in U.S. history.
In its motion, Detroit said court approval of the new swaps
deal would give the city unfettered access to casino tax revenue
used as collateral for the swaps as well as leverage in efforts
to win Rhodes' approval of its debt adjustment plan. That plan
calls for cuts to worker pensions and even bigger cuts for some
Rhodes also heard arguments on the timetable he released
last month that set a trial beginning June 16 on the plan's
factual issues. Some creditors wanted a trial date in July or
September. The judge said he will issue a revised schedule soon.