In bankruptcy breakthrough, Detroit reaches deal with its fiercest creditor foe
Detroit has hammered out a deal with its fiercest foe in bankruptcy court, possibly smoothing the way for the city to leave bankruptcy quickly.
Bond insurer Syncora Guarantee, Inc. had fought the city’s proposed plan of adjustment at every turn.
That restructuring plan would have forced the company to take hundreds of millions of dollars in losses.
But the two sides appear to have reached a somewhat complicated package deal Tuesday evening. Details won’t be confirmed until Wednesday morning, but according to the Detroit Free Press:
· Syncora is promised an additional $23.5 million in bond payments.
· Syncora already owns the company that leases and operates the Detroit portion of the Detroit-Windsor tunnel. The current lease expires in 2020; this deal would extend it to 2040.
· Syncora gets a long-term lease on a city-owned parking garage in the heart of downtown Detroit.
· Syncora gets $6.2 million in real estate credits that can be used to bid on city-owned properties coming up for sale.
Judge Steven Rhodes will need to approve the tentative deal.
The city just wrapped up day six of a trial to decide the plan of adjustment’s fate. If Rhodes OK’s the Syncora deal, it would speed up the trial and let Detroit exit bankruptcy faster.
It could also encourage the few other holdout creditors to reach deals, and potentially allow for a consensual resolution to the entire bankruptcy — something few people thought possible.
Most experts expected the case to be resolved by a “cramdown,” where the judge approves a bankruptcy plan over the objections of dissenting creditors.
Syncora lawyers have asked Judge Rhodes for a 48 hour delay in the trial to finalize details of the agreement with the city.