Detroit and Syncora Guarantee Inc. reached an agreement in their dispute over claims in the city’s $7 billion debt-reduction program that the two sides said may “profoundly alter” the city’s bankruptcy-exit plan.
Detroit and Syncora today requested the postponement of a hearing on Detroit’s plan of adjustment until Sept. 12 because they need 48 hours to address “conditions and logistics” of the deal. The filing didn’t describe terms of the deal.
“If this agreement is finalized within this time period as we expect, it will profoundly alter the course of the proceeding and the litigation plans of the remaining parties,” Detroit and Syncora wrote in today’s filing.
Detroit, a city of about 700,000, filed a record $18 billion municipal bankruptcy last year, saying decades of decline left it unable to provide basic services and still meet financial obligations. Since then, Detroit Emergency Manager Kevyn Orr has cut deals with city unions, retired workers and some bondholders to pay them less than they are owed.
In a deal announced earlier today, Mayor Mike Duggan said the city resolved a dispute with suburban counties over water distribution, leaving only two bond insurers, Syncora and Financial Guaranty Insurance Co. as the last major opponents to the city’s bankruptcy-exit plan. Syncora would be obliged to cover some investor losses imposed by the plan and has said the mediators who helped arrange what’s being called the grand bargain were biased against bondholders.
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That bargain calls for wealthy donors and Michigan lawmakers to shore up the city’s public pension system with more than $800 million. As part of the deal, the city agreed not to use its art collection to pay creditors.
Ryan Bennett, a lawyer for Syncora, and Thomas Cullen, a lawyer for Detroit, didn’t immediately respond to calls after regular business hours seeking comment on the agreement.
Detroit has been fighting Syncora, FGIC and the three counties over a proposal to eliminate more than $7 billion in city debt and extract tens of millions of dollars a year from its water department.
The case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).
–With assistance from Steven Church in Wilmington, Delaware.
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