Detroit’s bankruptcy trial is postponed until Monday because of a tentative agreement between the city and one of its biggest creditors: bond insurer Syncora.
During a 10-minute hearing this morning, attorneys for the city and the Bermuda-based company told Judge Steven Rhodes they need a few days to finish details of their new agreement. They filed a joint motion Tuesday evening asking for today’s hearing.
They asked for a postponement of the trial until they can finish terms of the deal. Syncora would no longer be objecting to the city’s restructuring plan, which could significantly shorten the trial, currently scheduled into October.
“There are other factors with the settlement that would have to be put into the plan,” said city attorney Heather Lennox, of the Jones Day firm. “We are in the process of redrafting the plan. There are a few mechanical issues that need to be worked out.”
Emergency Manager Kevyn Orr gave a copy of the preliminary terms to the city council last night. They include Syncora receiving some cash, a lease to operate the Detroit-Windsor Tunnel and a downtown parking garage as well as credit toward purchase of future assets the city might sell.
Ryan Bennett, a Syncora attorney, told the judge the agreement requires two banks, UBS and Bank of America, to release Syncora from its insurance obligations related to a pension financing deal. The banks in April settled with the city as part of the case for $85 million on about $280 million of debt.
“This intended result is not just a partnership for the plan but a partnership for the future of Detroit,” Bennett said.
After the hearing Bennett said other riverfront property might become part of the deal, which would also include Syncora withdrawing its current appeals in the case.
In court, attorneys representing other creditors in the case, including retirees, told Judge Rhodes they weren’t yet sure if they would object to the deal because they haven’t had time to review it.
Alfredo Perez, who represents another bond insurer, Financial Guaranty Insurance Co. (FGIC), told the judge he learned about the agreement the night before and had seen some documents related to it but he hadn’t had time to analyze it or talk to his client about its effect on their case.
“We would request that the trial be continued until Monday. At that time we’ll be able to assess what we’re going to tell you,” he said. “I’ve read it twice and I’m still having a hard time understanding it. … We don’t have any values. We’re trying to figure out what the values are.”
Claude Montgomery, who represents the Official Committee of Retirees, said the Syncora agreement COULD negate the committee’s support of the Plan of Adjustment.
“We are, as you know, a plan supporter,” Montgomery told the judge. “We do not know what our positions are with respect to this document that circulated last night.”
Rhodes granted their request for a postponement of the bankruptcy trial until Monday so the city and Syncora can continue to negotiate … and everyone else can determine what the deal means to the historic bankruptcy case.