Orr's restructuring plan released, historic meeting with Detroit's creditors is underway
The meeting has ended. We'll have updates later today on Orr's plan and reaction to it from other stakeholders.
The Detroit Free Press' Matt Helms tweeted a shot of Orr talking to the media after the meeting:
Detroit Emergency Manager Kevyn Orr just released his plan to restructure the city's debt. restructuring
You can read it here.
There is a lot of news in this report. You can follow what people are picking up on by following this Twitter feed:
Detroit emergency manager Kevyn Orr has laid out a sweeping scheme to restructure the city’s debt.
Right now, Detroit’s debt obligations—including bonds, pension payments, and retiree health care—consume more than 40% of the city’s general fund.
Orr projects that by 2017, that will rise to nearly 65%.
To rectify this so-called “death spiral,” Orr recommends some drastic moves.
- First, the city will stop making debt payments immediately to conserve cash.
- Second, Orr proposes across-the-board cuts to ALL creditors averaging roughly 90%.
That includes cuts to pensions—though because they're backed by some existing funds, that cut won't amount to 90%.
Michigan’s state constitution is widely believed to protect vested pensions, but Orr’s team doesn’t share that interpretation.
Detroit's emergency manager, Kevyn Orr, is meeting with Detroit's creditors today at the Westin Hotel at Detroit Metro Airport. He's hoping to negotiate terms that will keep the city out of municipal bankruptcy.
It's a tall task considering the city is more than $15 billion in debt.
Some activists were there to greet Orr and the creditors:
The Detroit News reported on the scene this morning as Orr entered the meeting with "about 150 representatives" of the city's creditors (here's a list of the banks, bondholders, unions, and pension funds the city owes money to):
Orr, flanked by two bodyguards, waved to the media at about 8:15 a.m. Friday on his way into the airport hotel. "Nice and quiet," Orr said when asked how he hopes the historic day will unfold. "It's been a long day already.” There were no protesters at 8:30 a.m. outside the Westin hotel entrance at Detroit Metropolitan Airport's McNamara Terminal, but there was a heavy police presence, including Michigan State Police troopers and Detroit officers. Orr was spotted entering the closed-door meeting with creditors just before 9 a.m. He had his suit coat off and flashed a smile before entering what could be a contentious meeting.
Orr is trying to sell his plan for repayment to the creditors. After today's meeting, Orr will reveal his plan to us.
Michigan Radio's Sarah Cwiek reported this morning that while the plan is being used to avoid bankruptcy, it could be used later as a blueprint for bankruptcy:
The idea is to convince creditors they’ll get a better deal now than they would if Orr takes Detroit to bankruptcy court. Michigan State University economist Eric Scorsone says even if Detroit does go there, Orr will still have major power to impose terms on creditors. “A Chapter 9 bankruptcy very much is in the hands of the city,” says Scorsone. “So in that sense, it’s in the hands of the emergency manager. It’s up to Mr. Orr and his team to lay out an adjustment plan that would help the city.” Scorsone says that in bankruptcy court, not all creditors are considered equal. Some have better claims than others—but sorting that out can be a long, costly process the city wants to avoid.
The Detroit News reports Orr's opening offer to creditors is 10 cents on the dollar. The bargaining over Detroit's future begins.
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Emergency Manager Kevyn Orr is unveiling a 200-page plan Friday to restructure the city of Detroit and avoid the biggest municipal bankruptcy in U.S. history.
Orr is meeting Friday morning with about 150 representatives from banks, bondholders, unions and pension funds, all of whom will be asked to make steep concessions or risk the uncertainty of a Chapter 9 bankruptcy.
The meeting, and creditors’ reaction to the plan, could push the city closer to bankruptcy or mark a step toward restructuring after decades of population loss, drops in income and property taxes and unchecked spending that has left the city with $15.6 billion in debt.
The meeting at the Westin Detroit Metropolitan Airport hotel is off-limits to the public and attendees are subject to strict security measures, including a cellphone and camera ban.
Orr, flanked by two bodyguards, waved to the media at about 8:15 a.m. Friday on his way into the airport hotel.
"Nice and quiet," Orr said when asked how he hopes the historic day will unfold. "It's been a long day already.”
There were no protesters at 8:30 a.m. outside the Westin hotel entrance at Detroit Metropolitan Airport's McNamara Terminal, but there was a heavy police presence, including Michigan State Police troopers and Detroit officers.
Orr was spotted entering the closed-door meeting with creditors just before 9 a.m. He had his suit coat off and flashed a smile before entering what could be a contentious meeting.
Detroit City Council President Pro Tem Gary Brown said earlier he hopes creditors are willing to compromise.
Detroit is running out of time, Brown said, and it is important to operate as if the city’s “hair is on fire.”
Orr could face considerable opposition to his plan.
Sources indicated Orr's opening offer is approximately 10 cents on the dollar — an initial offer that could increase during negotiations.
From The Detroit News: http://www.detroitnews.com/article/20130614/METRO01/306140057#ixzz2WCW04ToX