DETROIT: ‘ HISTORIC BANKRUPTCY HEARING ENDS NOW WHO PAYS WHAT TO WHOM ‘
#AceNewsServices – DETROIT – October 29 – The historic hearings on whether Detroit will exit the nation’s largest-ever municipal bankruptcy came to a quick end Monday after closing arguments, which were abbreviated by settlements with major creditors.
Moving the city closer to self-rule and something of a sense of normalcy, Judge Steven Rhodes said he would reveal his decision at 2 p.m. Nov. 7 after a fast-paced bankruptcy that defied predictions of drawn-out battles that could have stretched for years.
“We think we made our case and we met our burden,” Detroit emergency manager Kevyn Orr said outside court after closing arguments from city lawyers, attorneys for creditors and even individuals who object to the plan.
Rhodes pressured Detroit’s bankruptcy attorneys to justify better treatment for pensioners than financial creditors, making for an unexpectedly dramatic exchange.
In a discussion of the complicated math underpinning the city’s financial projections, Rhodes noted that pensioners could eventually get all their pension cuts restored if the city’s pension investments perform well over the next several years.
“Tell me why that isn’t a 100% recovery,” Rhodes asked Detroit bankruptcy lawyer Bruce Bennett.
“The math gets a little tricky here,” Bennett responded.
The exchange underscores the importance of the unfair discrimination issue in Detroit’s bankruptcy. Although all major creditors have struck settlements, bond insurers Syncora and Financial Guaranty Insurance Co. (FGIC) argued earlier in the case that pensioners were getting extraordinarily favorable treatment.
Civilian retirees are getting a 4.5% cut to their monthly checks, the elimination of cost-of-living-adjustment (COLA) increases and a claw back of excessive annuity payments. Police and fire pensioners are getting a reduction in COLA from 2.25% to 1%.
Retirees voted to accept the cuts, as well as a 90% reduction in their health care benefits.
Still, Judge Rhodes must approve the plan after an exhaustive trial that lasted nearly two months. During the proceeding, Rhodes heard testimony from dozens of witnesses and examined hundreds of exhibits documenting the city’s plan to slash more than $7 billion in unsecured liabilities and reinvest $1.4 billion over 10 years in basic services.
Bennett said the largely amicable plan is “very remarkable” after a tumultuous negotiation period with retirees, insurers, bondholders and unions.