The mediators in Detroit’s bankruptcy case released a statement this morning, describing terms of the deal reached between the city and three bond insurers. The agreement reduces the trio’s $388 million claim to $287.5 million and says the city “intends” to use the difference to support pensions, specifically those of the poorest Detroit retirees by ensuring they receive payments higher than the federal poverty level.
That’s a 74 percent payout, far above the 15 percent proposed in the city’s latest Disclosure Statement. But the agreement gives the city one creditor class that is guaranteed to vote in favor of the bankruptcy plan, allowing the court to mandate the rest of the plan and its terms for other creditors, including pensioners.
“The mediators are privileged to have played a role in assisting the parties to find common ground in reaching a resolution that reflects not only a fair settlement to the parties, but also creates an opportunity for the city to provide additional assistance to retirees,” the mediators’ statement reads. “…the Mediators hope that this settlement will encourage all of the remaining parties to the bankruptcy to re-double their mediation efforts to reach meaningful agreement which can be incorporated into a fair and balanced agreed-upon Plan of Adjustment to be presented to the Bankruptcy Court for confirmation.”
The bond insurers involved are National Public Finance Guarantee Corp., Assured Guaranty Municipal Corp. and Ambac Assurance Corp. In November, they took legal action against the city voter-approved property taxes were being illegally diverted to the general fund.
The deal will be reflected in the city’s next Disclosure Statement, due in bankruptcy court next week.