#AceFinanceNews – UNITED STATES (Detroit) – September 03 – An attorney for Detroit concluded his opening statement Wednesday in the city’s bankruptcy trial by saying the debt-restructuring plan focused first on resolving a dire financial situation and does not discriminate against creditors.
But an attorney for the most vocal of the opposing creditors said the plan of adjustment – Detroit’s blueprint for emerging from the largest municipal bankruptcy in U.S. history – is unfair for financial creditors.
The trial’s second day began with attorney Bruce Bennett telling federal Judge Steven Rhodes that the plan, put together by state-appointed emergency manager Kevyn Orr and his restructuring team, has to be followed in order for Detroit to be stronger and viable.
"The city did all of this with the proper purpose of restructuring its financial affairs," Bennett said, adding, "The facts will show Detroit has earned this court help."
Detroit wants to cut $12 billion in unsecured debt to about $5 billion through its plan of adjustment, which must be approved by Rhodes. Most creditors, including more than 30,000 retirees and city employees, have endorsed the plan of adjustment.
Syncora Guarantee is not one of those creditors. The New York-based bond insurer’s attorney, Marc Kieselstein, said the city’s plan is "so flawed in its structure, so dismissive of basic fiduciary duties and so lacking in evidentiary support that it cannot be confirmed without doing serious mayhem to the rule of law."
Here we go. The long-awaited bankruptcy trial in federal court to decide on the validity of the city’s plan to correct its disastrous financial situation and right the ship begins today at the courthouse in downtown Detroit.
Chad Livengood of The Detroit News reports that a key component to the city’s plan is the "grand bargain." Livengood describes it as "the linchpin of the city’s plan to dump $7 billion in debt in bankruptcy court — will be put to the test in a long-awaited trial set to begin today in federal court."
He notes that two very disgruntled financial insurance companies, Syncora Guarantee Inc. and Financial Guaranty Insurance Co., the backers of $1.4 billion in troubled pension debt the city wants to expunge from its books, could be ruined if the plan goes through as is. The News reported over the weekend that Syncora was in talks with the city attorneys about possibly taking Detroit real estate, including the city airport, to satisfy its debt.