DETROIT, June 26 The federal judge overseeing
Detroit's historic bankruptcy case on Thursday indicated he is
willing to join a bus tour proposed by the city, while rejecting
demands by a major creditor in the case for an explanation of
how a legal opinion was reached.
Judge Steven Rhodes, who is no stranger to Detroit having
served there as a bankruptcy judge since 1985, said in court he
was open to the idea of a tour as long as its timing and
locations are not publicly disclosed.
Detroit had argued that a site visit would provide important
evidence for Rhodes as he determines whether Detroit's plan to
adjust $18 billion of debt and exit the biggest municipal
bankruptcy in U.S. history is fair and feasible.
But some city creditors, including bond insurance companies
and European banks that own Detroit debt, objected to the tour,
calling it improper and unnecessary.
Meanwhile, Syncora Guarantee Inc, one of the few remaining
hold-out major creditors in the case, dropped its demand for
personal financial information for some 20,000 retired city
workers. Detroit had vehemently protested the move, but agreed
on Thursday not to use the financial hardships of retirees as an
argument for their treatment in the debt adjustment plan.
The judge had urged the parties not to make the financial
conditions of retirees relevant to the case, warning it would
make the case unwieldy and that the financial conditions of
other creditors, including Syncora, would also become relevant.
James H.M. Sprayregen, a partner at Kirkland & Ellis who
represents Syncora, told Reuters on Wednesday that Syncora's
request was reasonable given the city had been citing the
greater economic harm to retirees versus financial creditors for
justifying the disparate treatment of those creditor groups.
He also said Syncora, which has a nearly $400 million
exposure to Detroit mainly from insuring defaulted city pension
debt, was facing a recovery of just pennies on the dollar under
the city's debt adjustment plan.
Rhodes ruled against an attempt by Syncora to question
officials at philanthropic foundations about negotiations that
led to their participation in the so-called grand bargain with
pledges of $366 million to ease pension cuts for city retirees
and protect the Detroit Institute of Arts' collection from being
sold to pay city creditors.
However, the judge agreed to allow Syncora to access
information from the foundations on how they intend to raise
money for their part of the grand bargain.
Rhodes sided with Michigan Attorney General Bill Schuette,
who was fighting a Syncora subpoena for a deposition, saying
there was no legal basis for questioning him about a legal
opinion he issued.
Syncora had wanted to depose Schuette about his 2013
opinion that the collection at the Detroit Institute of Arts
cannot be sold, conveyed or transferred to satisfy the city's
debts. Schuette had contended that deposition of state attorneys
general on how and why they reached legal conclusions were not
allowed by courts.
Rhodes has scheduled an Aug. 14 start date for a
confirmation hearing on Detroit's plan.
(Reporting by Cherie Curry in Detroit; Additional reporting by
Karen Pierog in Chicago; Editing by Eric Walsh)