July 5 (Reuters) - The city of Detroit has filed a lawsuit against bond insurer Syncora Guarantee Inc, claiming the company is blocking an agreement the city hopes to conclude with major creditors, the Wall Street Journal reported on Friday.
The suit filed on Friday by Detroit’s state-appointed emergency manager, Kevyn Orr, focuses on the city’s estimated $170 million a year casino tax revenue, the paper said. The city maintains Syncora told a bank that controls the funds not to give the money to Detroit.
Representatives of Syncora could not be reached for comment.
Orr declined to confirm to Reuters whether the city had filed suit, but he did say: “Syncora was interfering with the city’s ability to restructure.”
Orr’s spokesman, Bill Nowling, confirmed the lawsuit had been filed, but would not provide any details.
Detroit has some $18.5 billion in long-term debt and Orr was appointed by Michigan Governor Rick Snyder to fix the city’s financial crisis. Orr has sweeping powers and is trying to conclude deals with creditors to avoid bankruptcy.
The WSJ reported that Detroit sees Syncora as standing in the way of a proposed deal to pay UBS AG and Bank of America Merrill Lynch more than 70 cents on the dollar on nearly $340 million in secured debt, citing sources familiar with the matter. In return, Detroit would receive $11 million a month in tax revenue from its three casinos, funds that were used as collateral to back the debt.
The WSJ cited the emergency manager’s office as saying Wayne County Circuit Judge Jeanne Stempien had issued a temporary restraining order saying the casino funds could be released to the city and set a hearing on the issue for July 26.
The Wayne County clerk could not be reached for comment.