Detroit's new bankruptcy deal worth 26 cents on the dollar, up from 10 cents
Judge Steven Rhodes has suspended Detroit's bankruptcy trial until Monday so the city can work out details of a deal with one of its major creditors.
News of the potential deal broke last night. Syncora, a bond insurer, stands to lose $400 million in Detroit's bankruptcy.
Alisa Priddle of the Detroit Free Press reports the deal the city is trying to work out with Syncora would be worth 26 cents on the dollar vs. 10 cents on the dollar under the city's current plan.
More from the Freep:
Among the goodies are $23.5 million in payment in the form of B-notes; a long-term lease on a centrally located parking garage; a 20-year extension of the lease to run the U.S. side of the Detroit-Windsor Tunnel to 2040; and $6.2 million in credits towards the purchase of some parcels of land in the future.
The pause in the trial also gives the city time to reach other settlements with other creditors. One of the biggest is Financial Guaranty Insurance Co.
FGIC insured a deal made under the Kwame Kilpatrick administration that shored up the city's pension liabilities.
Here's how that deal was described by the Freep last spring:
Under former Mayor Kwame Kilpatrick, Detroit sold the pension obligation certificates of participation to boost funding at the city’s General Retirement System and Police and Fire Retirement System to nearly 100%. The city also bought so-called swaps, or derivatives, to permanently lock in steady interest rates around 6% on the arrangement. But three years later, as the national economy tanked, interest rates plummeted, souring the deal.
Robert Snell and Christine Ferretti of the Detroit News spoke with one of Syncora's lawyers, Ryan Bennett.
Bennett said the deal before Syncora now relies on the city settling its issue with FGIC.
Bennett said he’s not aware of any deals in the works between the city and FGIC. But the holdout creditor could benefit as well from the “shared asset pool” and that Syncora’s tentative agreement “sets a path” for FGIC, he said.
The Freep's Priddle reports that an FGIC lawyer said they need to "better understand the deal" and it will affect the witnesses he calls when the bankruptcy trial resumes next week.
*This post has been updated.