The City of Detroit on Friday filed its latest Plan of Adjustment and Disclosure Statement — We have the version with marked changes from previous documents. The Plan of Adjustment is a detailed description of how the city intends to pay its debts over the next several years. The Disclosure Statement, according to bankruptcy law, is intended to provide “adequate information” to help evaluate the plan.
In a court filing today (see below), attorneys for the city of Detroit say they will file an updated Plan of Adjustment and Disclosure Statement on March 31 and requested other court deadlines be adjusted accordingly.
“This amended Disclosure Statement will include many revisions in response to informal requests for the inclusion of additional information in the Disclosure Statement provided to the City by various parties,” the city’s attorneys wrote.
Judge Steven Rhodes granted the city’s request. The deadline to file objections to the Disclosure Statement is now April 3. The city will file a Consolidated Response by April 10.
Detroit Free Press Business Writer Nathan Bomey says of the amended plan and statement:
The new documents could include new offers to creditors. They could also include different financial projections that would affect payouts to creditors and investments in city services. …The new plan of adjustment is likely to incorporate the city’s recently renegotiated settlement with Bank of America Merrill Lynch and UBS, which agreed to accept $85 million to eliminate a $288-million pension debt interest-rate bet that helped plunge Detroit into bankruptcy.
Meanwhile, according to The Detroit News, two investment banks will no longer be required to support the city’s Plan of Adjustment in exchange for a debt settlement deal the city had worked out with them, according to court filings from Wednesday.
UBS AG and Bank of America’s Merrill Lynch Capital Services and the city earlier announced they had reached an agreement of $85 million in the “swaps” deal, originally totaling $286 million. Rhodes has twice rejected agreements between the banks and the city, calling them too costly for the city and ordering the parties back to negotiations. The deal is backed by about $15 million in monthly casino tax revenue. That’s money the city could use for services and operation if the settlement agreement is approved.
The News’ Robert Snell and Chad Livengood write of the new agreement:
Language was removed requiring the banks to support the city’s debt-cutting plan. Instead, the banks have agreed to support the debt-cutting plan as long as the settlement is included in the city’s restructuring blueprint. … In a late Friday night 1,700-page court filing, the banks’ attorneys warned that if Rhodes doesn’t approve this third deal, “costly and hotly contested litigation will ensue that will likely take years to resolve.”
The last day of February was the deadline for creditors to object to the ambitious schedule set by Bankruptcy Judge Steven Rhodes for Detroit’s case. And object they did.
Reuters reports that one creditor, Syncora Guarantee Inc. “warned that lawsuits will be filed over the Detroit Institute of Arts’ collection, which the city is not selling at this point to help pay its $18 billion in debt.” In its filing, Syncora also threatened a long legal battle over the Detroit Institute of Arts collection, according to The Detroit News.
While all that was going on in federal court, the city was mailing ballots to 170,000 creditors, the Detroit Free Press reports, seeking their approval on the Plan of Adjustment filed Feb. 21 and how it would restructure the city’s debt.
Also Friday, citing the millions of dollars it would cost the city, Judge Rhodes granted the city’s request to disband a creditors committee, set up by the U.S. Trustee in December. The panel included bond insurer Financial Guaranty Insurance Co and the city’s two pension systems.
Earlier this week, our Detroit Journalism Cooperative partner through New Michigan Media, The Michigan Citizen, analyzed the Plan of Adjustment finding:
Activists say what is most significant in Orr’s plan is the transfer of assets, which includes Belle Isle, the Detroit Institute of Arts and Detroit’s Water and Sewerage department. The plan protects the banks, but does little to adequately improve city services or improve quality of life for Detroit residents.
Detroit Emergency Manager Kevyn Orr’s office has released a statement about the city’s Plan of Adjustment and Disclosure Statement filed today in U.S. Bankruptcy Court.
Here’s what the city considers the highlights of the plan:
* Devotes $1.5 billion over 10 years to capital improvements, blight removal and equipment and technology upgrades.
* During the next five years, up to $500 million of the $1.5 billion will go toward blight removal.
* Proposes 20 percent payment to unsecured, non-retiree creditors in the form of new securities from the city and a pledge to increase that if the city’s finances improve.
* Assumes $465 million from third-party donors and the Detroit Institute of Arts toward the pension funds over two decades, subject to city and pension fund agreement and conditions.
* Includes Gov. Rick Snyder’s proposal to send $350 million of state money to Detroit over 20 years.
* Allows that if police and fire pensioners agree to the plan and there is some settlement with the state, they could receive more than 90 percent of their pensions with the elimination of cost-of-living allowances. General retirees cold receive in excess of 70 percent of their pensions after elimination of cost of living allowances.
* Moves current city employees into defined benefit plans.
In other development, mediations continue toward agreements with key creditors in the process overseen by Chief U.S. District Judge Gerald Rosen. Talks are ongoing for the interest-rate, pension debt swaps agreement as well as the future of the Detroit Water and Sewerage Department.
Michigan Radio’s Jack Lessenberry has a few predictions about Detroit’s plan of adjustment, expected to be filed in bankruptcy court this week. On “This Week in Michigan Politics,” Lessenberry and Christina Shockley discuss potholes, an effort to raise Michigan’s minimum wage and the upcoming trial challenging marriage equality in the state as well as the city’s plan of adjustment.
“It’s probably going to include pension cuts,” Lessenberry predicts. “it’s probably not going to include looting the DIA.”