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Aug 21 Detroit has once again raised the
possibility of having a regional water and sewer system
authority in the latest version of a debt adjustment plan the
city filed in the U.S. Bankruptcy Court late on Wednesday.
The new draft of the plan -- the last one expected ahead of
a financial feasibility trial scheduled to open in early
September -- also includes the city's current effort to
repurchase $5.2 billion of outstanding water and sewer system
Nearly 25.7 percent of the bonds were tendered by late
Wednesday, according to tender agent Bondholder Communications
Group. Bondholders have until 5 p.m. Eastern Time on Thursday to
take up the city's tender offer.
If enough bonds are returned and if the city can project
sufficient savings from a planned bond refunding, Detroit could
sell up to $5.5 billion of refunding bonds in the municipal
market as soon as next week. The city also could privately place
the debt with financial institutions.
Discussion of the proposed regional authority to run the
city's water and sewer services returned to Detroit's plan after
the idea was dropped in a prior draft earlier this year.
That prompted Judge Steven Rhodes, who is overseeing
Detroit's historic bankruptcy case, to order the city and Wayne,
Macomb and Oakland counties into mediation on the concept.
Detroit currently provides water and sewer services in those
counties, but the system is in need of costly repairs.
"As a result of mediation or otherwise, it is possible that
the city may enter into an authority transaction that includes
the formation of the DWSD (Detroit Water and Sewer Department)
Authority to conduct many or all of the operations currently
conducted by DWSD," the sixth amended plan said.
It added that the deal would be subject to approval by the
bankruptcy court and other involved parties and would require
the three counties to drop their objections to the debt
As part of Detroit's plan to adjust $18 billion of debt and
exit the biggest-ever municipal bankruptcy, the city said it
would use $408.6 million in water and sewer revenue over nine
years to cover payments to the Detroit General Retirement System
accrued through June 30. The three counties have objected to the
revenue diversion, contending the money is needed for critical
Rhodes will commence on Sept. 2 a lengthy confirmation
hearing on Detroit's plan to determine if it's fair and
feasible. The key proceeding had been slated to start on Aug. 29
with objections from individual creditors without legal
representation, but Rhodes on Wednesday postponed that portion
until later in the hearing.
The updated financial plan also touches upon a state-run
financial review commission, created under a new Michigan law,
which would oversee Detroit's finances after it exits
"The financial oversight board shall be composed of
individuals with recognized financial competence and experience
and shall have the authority to, among other things, impose
limits on city borrowing and expenditures and require the use of
financial best practices," the plan said.
It added that the city will "promptly" provide the court
with any reports given to or received from the commission.
Rhodes last week directed Detroit to present details at the
confirmation hearing on how the law will be implemented.
The law, which was enacted in June as part of Michigan's $195
million contribution to the plan, creates a nine-member panel
that will stay active until Detroit meets certain financial
(Reporting By Karen Pierog; Editing by Greg Mahlich)