The chief mediator in the Detroit bankruptcy case has ordered several creditors — including the last major one opposing Detroit’s bankruptcy plan — into closed-door negotiations with the city.
Resolutions could bring an end to the nation’s largest-ever municipal bankruptcy. Under the city’s plan to exit bankruptcy two bond insurers – Syncora and Financial Guaranty Insurance Company– stand to lose more than $1 billion. In the ongoing trial over the plan they’ve argued the city was illegally favoring other creditors and avoiding selling assets like the collection at the Detroit Institute of Arts.
But this week Syncora changed sides – backing the bankruptcy plan in exchange for a larger return on its claims and incentives worth millions of dollars. Still that deal hinges on two banks that have already settled with the city to release Syncora from insurance claims.
U.S. Chief District Judge Gerald Rosen, who is the chief mediator in the Chapter 9 case, issued this order Wednesday sending parties in that deal into mediation.
On Thursday, Rosen ordered FGIC into negotiations with the city and several other creditors, including the Official Retirees Committee, that will continue “day-to-day thereafter as deemed necessary, until released by the mediators.”
News of the Syncora deal broke Tuesday evening, and attorneys for the city and the Bermuda-based company on Wednesday asked the judge to postpone the bankruptcy trial. During the court hearing, several attorneys made statements on the record about the deal.
Here’s what FGIC’s attorney said during that hearing.