March 31 Some of Detroit's retirees and
bondholders would fare a little worse under a revised plan the
city filed in U.S. Bankruptcy Court on Monday to deal with its
$18 billion of debt and other obligations.
Investors who bought Detroit bonds that the city has deemed
to be unsecured would stand to recover only 15 percent of their
investment, down from 20 percent in the initial plan Detroit
filed in February. [ID: nL2N0LQ2N6] That would be a cut of 85
percent of their bonds' value.
At the same time, proposed cuts to pensions of some retired
city workers grew in the revised plan. For police and fire
retirees the potential cuts would rise to 6 percent from 4
percent in the previous plan in the case of a timely settlement,
and to 14 percent from 10 percent if the plan is rejected and
money pledged by foundations and the state of Michigan for
retirees is not forthcoming.
The range of cuts to general city worker retirees remained
the same at 26 percent with a settlement and 34 percent without.
The revised plan also lays out how voting by retirees on the
plan would be construed as a timely settlement.
"If at least one half in number and two thirds in amount of
holders of (Police and Fire Retirement System) pension claims
and holders of (General Retirement System) pension claims
separately vote in favor of the plan, then the holders of all
such claims shall be deemed to have entered into a timely
settlement with the city and the state," according to a revised
disclosure statement the city also filed.
The amended plan also called for creating a separate class
on impaired creditors, those with claims related to retiree
health, dental, vision and death benefits. The claims would be
treated the same as other non-pension unsecured classes of
claims, according to the document.
Detroit also laid out its proposal to end costly
interest-rate swap agreements with two investment banks at a
deeply discounted cost of $85 million. That deal has yet to win
approval of Judge Steven Rhodes, who is overseeing Detroit's
historic bankruptcy case. He rejected two previously proposed
deals as being too costly.
The city said it expects to file further changes before an
April 14 hearing to approve the disclosure statement.
"The city looks to exit its historic bankruptcy by late
summer as a fiscally solvent municipality that is better able to
provide basic services to its residents," a statement issued by
Before the city's filing of a revised plan, bond insurer
Syncora Guarantee Inc filed a motion to extend this week's
deadline to file objections until April 14. That would push back
a court hearing on any unresolved objections to Detroit's
disclosure statement to April 28 from April 14, according to the
Detroit's largest union, the American Federation of State,
County and Municipal Employees Council 25; the city's two
pension funds and other creditors supported the extension while
the city condemned the move as a delay tactic.
A hearing on the motion is scheduled for Wednesday.
(Reporting By Karen Pierog and Lisa Lambert; Editing by