DETROIT (Reuters) - Detroit will file a plan to adjust its debt with the Bankruptcy Court next week, an attorney representing the city told the judge overseeing the case on Monday.
Bruce Bennett, an attorney with law firm Jones Day, told Judge Steven Rhodes that Detroit’s filing target of Friday was too tight and needed to be extended.
The city, which filed the biggest municipal bankruptcy in U.S. history in July, sent a proposed plan to creditors on January 29, saying it expected to submit a plan to the court in about two weeks. Rhodes had set an ultimate deadline of March 1 for the city to produce its required roadmap out of bankruptcy.
A copy of the confidential proposal obtained by Reuters indicated that Detroit’s two pension funds, its largest unsecured creditors, would fare better than owners of city bonds that are also considered unsecured debt.
The proposal, which was crafted by Detroit Emergency Manager Kevyn Orr and his team of consultants based on discussions with creditors, also excluded interest-rate swap agreements from the settlement plan after Rhodes twice rejected agreements between the city and swap providers to end them at a discounted cost.
Bill Nowling, Orr’s spokesman, said last week that talks were ongoing with UBS AG and Merrill Lynch Capital Services over the swaps, which were used to hedge interest rate risk on some of the $1.45 billion of pension debt Detroit sold in 2005 and 2006. Detroit on January 31 filed a lawsuit seeking to invalidate that debt.
Reporting by Rachel Jackson in Detroit; additional reporting by Karen Pierog in Chicago; editing by Matthew Lewis