Progress on various fronts in Detroit’s Chapter 9 bankruptcy case provides hope that the City could emerge from bankruptcy by this fall. Recently the City’s Emergency Manager, after prodding by the case’s presiding judge, entered in to a deal with a few banks which had insured municipal bonds in an interest-rate swap. The nature of the transaction was such that it was widely believed that the City would be legally bound to repay those creditors in full. But Kevyn Orr, the Emergency Manager, reached an agreement in which the City would only have to pay 74% of the total amount owed.
And then Orr reached a deal with groups representing retired city pensioners. Previously it was expected that retired City policemen and firefighters would have to take 14 percent reductions in promised benefits. But the agreement made with Orr involves no benefit cuts but only reductions in annual cost-of-living increases. Civilian retirees had been bracing for 34% reductions in their pension benefit payments but the settlement reached with the City Manager would entail cuts of only 4.5%.
For federal bankruptcy judge, Steven Rhodes, the fact the City has reached agreements with this class of creditors, affords him the opportunity to use his cramdown authority to reduce the principal balance of a debt owed to some secured creditors to the value of the property it is secured. Combined together, these developments generate momentum to complete the Chapter 9 reorganization by the fall when Mr. Orr’s tenure as emergency manager ends.
Meanwhile, a group of non-profit organizations have pledged $466 million to ensure that certain valuable art work owned by the City and exhibited at the Detroit Museum of Art does not need to be sold. Also the City’s path to solvency will also need the Michigan Legislature to approve $350million which the Governor has said will come from unused funds from a tobacco settlement.
In Albuquerque, Giddens & Gatton Law, P.C. has attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases. The firm represents many debtors and creditors in Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Contact Giddens & Gatton Law, P.C. at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com. Giddens & Gatton Law, P.C. is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.