June 9 The federal judge overseeing Detroit's
bankruptcy delayed, by three weeks, the start of a hearing to
confirm the city's debt adjustment plan, raising the possibility
that the case could drag on beyond the term of Detroit's
Judge Steven Rhodes on Monday released the case's fifth
revised schedule, pushing back the start of the hearing until
Aug. 14 from July 24. The schedule listed as many as 28 hearing
days that could stretch until Sept. 23.
That means the bankruptcy case the city filed in July 2013
could drag on beyond Kevyn Orr's 18-month term as the city's
state-appointed emergency manager. Under Michigan law, Detroit's
elected officials could opt to remove Orr in late September. Orr
has indicated he expects to leave the job at that time.
Michigan Governor Rick Snyder told reporters on a conference
call last Wednesday that he hoped the confirmation trial would
be over by the end of September, leaving at the most several
weeks until the plan's effective date.
"We'll be prepared with appropriate contingencies," he said,
declining to discuss options.
Orr and his team of consultants had originally pushed for a
speedy schedule to wrap up the biggest municipal bankruptcy in
U.S. history. But the complex case has taken longer than
expected. The city's plan to adjust $18 billion of debt and
other obligations was first filed with the court on Feb. 21 and
has been revised several times as Detroit reached new
settlements with creditors.
Last week, a group of so-called objecting creditors that
includes bond insurers, banks and unions proposed moving the
confirmation hearing's start to Sept. 18, contending the city's
tardiness in producing documents does not afford them enough
time to prepare for the proceeding.
The city countered on Thursday that a two-month delay was
not warranted as it has already produced "tens of thousands of
documents that the objectors have requested." Instead, Detroit's
attorneys suggested changing the trial's start to Aug. 11 with
its conclusion targeted for Sept. 12.
Rhodes, who must determine if Detroit's plan is fair and
feasible, has also delayed until July 16 and 17 a hearing on
legal issues in the case that had been set for June 24. But his
timetable continues to call for thousands of Detroit creditors
to complete voting on the debt adjustment plan by July 11.
James Spiotto, managing director of Chapman Strategic
Advisors and an expert on municipal bankruptcy, cautioned that
moving the case along too quickly could give ammunition to
creditors who choose to appeal the outcome of the case.
"As much as you want to stay on track you want to make sure
people have time. It's the notion of due process," he said in an
interview on Friday, adding that creditors could claim abuse of
discretion or denial of due process in their appeals.
Still, he said, most Chapter 9 municipal bankruptcies end in
settlements and do not result in appeals.
(Reporting By Karen Pierog; Additional reporting by Tom Hals
and Lisa Lambert; Editing by Steve Orlofsky)