Detroit files for Chapter 9 bankruptcy amid staggering debts

[theworldismine13]

Detroit files for Chapter 9 bankruptcy amid staggering debts | Detroit Free Press | freep.com

The City of Detroit filed this afternoon for Chapter 9 bankruptcy protection in federal court, laying the groundwork for a historic effort to bail out a city that is sinking under billions of dollars in debt and decades of mismanagement, population flight and loss of tax revenue.

The filing begins a 30- to 90-day period that will determine whether the city is eligible for Chapter 9 protection and define how many claimants might compete for the limited settlement resources that Detroit has to offer. The bankruptcy petition would seek protection from creditors and unions who are renegotiating $18.5 billion in debt and other liabilities.

Detroit emergency manager Kevyn Orr, who in June released a plan to restructure the city's debt and obligations that would leave many creditors with much less than they are owed, had warned consistently that if negotiations hit an impasse, he would move quickly to seek bankruptcy protection.

■ PDF: Read the bankruptcy filing

Gov. Rick Snyder would have to sign off on the filing. A spokeswoman did not immediately return telephone calls today.

Orr’s spokesman Bill Nowling would not confirm today that the filing is imminent. However, he said, “Pension boards, insurers, it’s clear that if you’re suing us, your response is ‘no.’ We still have other creditors we continue to have meetings with, other stakeholders who are trying to find a solution here, because they recognize that, at the end of the day, we have to have a city that can provide basic services to its 700,000 residents.”

■ Related: Detroit’s pension boards file suit to block cuts in workers’ benefits

■ Editorial: How Detroit came to betray its retirees

■ PDF: Read Kevyn Orr’s plan to creditors

■ Full coverage: Detroit’s financial crisis

This week, the city’s two pension funds (which have claims to $9.2 billion in unfunded pension and retiree health care liabilities) filed suit in state court to prevent Orr from slashing retiree benefits as part of a bankruptcy restructuring.

Ambac Assurance Guaranty, which insures some of the city’s general obligation bonds, has also objected to Orr's plan to treat those bonds as “unsecured,” meaning they’re not tied directly to a revenue stream and would receive pennies on the dollar of their value. Ambac, and other creditors, have threatened to file suit.

Sources agree that Orr’s deal with creditors, widely reported to be Bank of America Corp. and UBS AG, to pay a $344-million swap with a $255-million debtor-in-possession loan, is instrumental in the timing of the potential bankruptcy filing.

The deal gives the city access to $11 million a month in casino tax revenues that Orr has said is key to maintaining city services while negotiations, in or out of bankruptcy court, take their course with other creditors and unions.

Plunkett c00ney bankruptcy lawyer Doug Bernstein, who is not involved in the bankruptcy and is not representing any parties related to it, said today he had no direct information about whether or when the city would file, but said he understands the strategy if the city were to do so Friday or perhaps over the weekend.

On Monday, an Ingham County Circuit Court judge is scheduled to hold a hearing on the city workers’ and retirees’ challenge to stop the city from filing bankruptcy.

The employee groups, and separately the city’s two pension funds in another lawsuit, argue that the governor — who under Michigan law must authorize any bankruptcy filing — cannot do so if the filings include plans to reduce pension benefits, because the state’s constitution explicitly protects public pensions.

Bernstein said preventing the court hearing on Monday is likely a key part of the strategy behind a Chapter 9 petition by the city, because a ruling in favor of the employees could put a halt, at least temporarily, to any moves by Orr and Snyder to proceed with a bankruptcy petition. A bankruptcy filing immediately stays all such court proceedings.

“The stay kicks in as soon as the filing, whether it’s Friday or Monday,” Bernstein said. “The key is taking advantage of the automatic stay. Because of the lawsuit filed by the pension funds and the hearings coming up Monday, it became a factor, so to the extent that (Orr) wanted to continue negotiations with creditors, now the city is forced to” file a Chapter 9 petition.

The 30- to 90-day eligibility fight could be prolonged beyond that time frame if creditors mount a significant challenge to Detroit’s eligibility for bankruptcy. In other communities that have filed for Chapter 9 protection, such fights have extended the process a year or more, including Jefferson County, Ala., and Stockton, Calif., two of the largest municipal bankruptcy filings so far in the U.S.

Detroit’s would be by far the largest municipal bankruptcy in U.S. history, in terms of the city’s population of about 700,000 and the amount of its debts and liabilities, which Orr has said could be as high as $20 billion. Because of the stakes involved, and the impact on residents statewide, as well as 30,000 current and retired city workers and Detroit’s ability to stay in business, the case could be precedent setting in the federal judiciary. It could also set an important trajectory for the way troubled cities nationwide settle their financial difficulties.

Bernstein noted that Orr has said repeatedly his office would “negotiate with creditors until and unless we find that the negotiations won’t bear fruit, with the understanding that the city has a limited amount of time” for those talks.

 

[Regular_P]

Up to $20 billion in debt.

 

[BlvdBrawler]

Up to $20 billion in debt.

For a SINGLE city.

 

[Piff Perkins]

mismanagement/fraud+tax money going to the state instead of the city

 

[ltheghost]

I'm just waiting to see who is going to buy the city now...they couldn't take it during the election for mayor, now the governor is probably going to sell it for nickels on the dime.

 

[wire28]

everybody knew we was broke, time to just get the jokes over with so we can continue the comeback

 

[Julius Skrrvin]

 

[88m3]

this is going to be interesting

 

[Captain Crunch]

@Coney Island @Blackking @SwiggyCabrera24
Anybody got pics/videos of the new Downtown/Midtown in Detroit?

 

[the cac mamba]

 

[Blackking]

@Coney Island @Blackking @SwiggyCabrera24
Anybody got pics/videos of the new Downtown/Midtown in Detroit?

my pics have random people in them, so i don't wanna post them... but here is a propaganda video.

[ame=http://youtu.be/BmDiQxMdHmw]This is Home - Live in Downtown Detroit - YouTube[/ame]

[ame=http://youtu.be/XgqYvwSDHgI]Love Detroit - GalaxE Solutions - YouTube[/ame]

 

[The Message]

I'm just waiting to see who is going to buy the city now...they couldn't take it during the election for mayor, now the governor is probably going to sell it for nickels on the dime.

 

[Blackking]

I don't agree with this really, but fukk it... This might improve city services and improve conditions of areas that aren't downtown/mid

 

[88m3]

I don't agree with this really, but fukk it... This might improve city services and improve conditions of areas that aren't downtown/mid

what if it doesn't?


all of those poor peoples pensions

 

[Black Magisterialness]

@Coney Island @Blackking @SwiggyCabrera24
Anybody got pics/videos of the new Downtown/Midtown in Detroit?

I can get some this weekend... It's kinda hard to capture in photos though, take it from a resident, the improvements are all in motion and the little things. More people walking the streets, more festivals within the city limits and events, more cultural events. Small cafes and bars popping up...if you arent from there it would seem like it was always like this, but take it from me....it CANNOT get worse than what it was in the early to mid 2000's socially. That was the onset of black flight on top of the white flight.


But honestly we prayed this wouldn't happen but it was truly inevitable. You just CANNOT sustain a city made for 2 million plus with a little over 700k it just doesn't add up. Inept governing and corruption added to an already very serious issue not to mention the fact that socially majority of the state was on a "fukk Detroit" binge for the latter half of the 20th century. If there are any "saviors" of the city it will be Dan Gilbert, the Illich Family and a coalition of black/arab small business owners and strangely "hipsters". People complained about what they did to Bed-Stuy and Williamsburgh in NYC but Detroit would LOVE that sort of revitalization.