DETROIT (WWJ/AP) – A judge has suspended Detroit’s bankruptcy trial until Monday to give the city more time to work out details of a settlement with a major creditor.
The time-out Wednesday also gives the city an opportunity to reach other settlements.READ MORE: Michigan Matters: Impacting Health & Well-Being Across Metro Region
The city reached a deal Tuesday with Syncora, a bond insurer that stood to lose $400 million under Detroit’s plan to get out of bankruptcy. Detroit would extend Syncora’s lease on a tunnel between the U.S. and Canada and also get a long-term lease on a parking garage.
The financier would get 26 percent of what it’s owed.
Syncora attorney Stephen Hackney spoke with reporters outside federal court on Wednesday.
“I don’t think I can say that either were that Machiavellian, or that smart,” Hackney said. “I think we’ve just been trying to do, basically, is…assert rights and ask for fair treatment.”
“And so we’ve been making arguments across the board and, based on the plan that’s been set up, this is commercial resolution that’s advantageous to both parties,” he said.
Judge Steven Rhodes is holding a trial to determine if Detroit’s bankruptcy exit plan is fair and feasible. Syncora is one of many creditors in the case, but it has been one of the loudest.
The latest settlement won’t end the trial. Judge Rhodes still must hear from many witnesses, including emergency manager Kevyn Orr, who took Detroit into bankruptcy 14 months ago, and Marti Kopacz, an expert hired by the judge to give an opinion on the city’s plan.READ MORE: Detroit Police Department To Host Drive-Up Candy Stations On Oct. 31 At All Precincts
The judge has set aside weeks to hear evidence that will help him decide whether Detroit’s plan is fair to creditors and feasible in the long run. Trial began Sept. 2.
Detroit is proposing to get rid of $7 billion in debt and plow $1.7 billion into city services over the next decade. Thousands of retirees have backed a plan that would cut their pension by 4.5 percent and eliminate annual cost-of-living raises. The pension losses could be restored in years ahead if investment returns improve.
Syncora, which has a claim for $400 million, now is likely to recover 26 percent, said Steven Schlein, a spokesman for a law firm representing the company.
Detroit would extend Syncora’s lease on a tunnel between the U.S. and Canada and grant it a long-term lease on a downtown parking garage, among other concessions.
Before the deal, Syncora had aggressively challenged its treatment by Detroit, saying it deserved more than pennies on the dollar. It even went after the mediators who had been working behind the scenes for months to protect art at the Detroit Institute of Arts and soften pension cuts.
Detroit’s plan is “hopelessly defective,” the bond insurer’s legal team said in May. “If it were an automobile, it would be pronounced a lemon and promptly sent to the scrapyard.”
The judge recently said Syncora’s lawyers could face sanctions after a separate “scandalous and defamatory” filing against Chief U.S. District Judge Gerald Rosen and attorney Eugene Driker, mediators who helped arrange an $816 million pension bailout that also prevents the sale of art.Metro Detroit Woman Files Lawsuit Against Walmart, Says Discriminated Against By Managers
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