Detroit's bond insurers, banks and unions are lawyering up in anticipation of court proceedings for the largest municipal bankruptcy case in U.S. history, with $18 billion of debt at stake.
Assured Guaranty, MBIA's National Public Finance Guarantee, Syncora and Ambac Financial Group, which together have more than $4.7 billion of exposure to bonds on which the city has threatened to default, have all retained legal counsel to help weather the 30- to 90-day process that will determine whether the city is eligible to reorganize its debt under Chapter 9 of the bankruptcy code. The case, which had its first hearing Wednesday, will center on emergency manager Kevyn Orr's controversial plan to lump the city's general obligation bonds with unsecured debt, such as retiree health care costs.
MBIA's National Public Finance Guarantee, which has exposure of $2.3 billion in net par value of Detroit debt, according to a Standard & Poor's report on Tuesday, has retained Sidley Austin LLP, MBIA confirmed. National has also retained local Michigan firm Jaffe Raitte Heuer & Weiss.
"The retention of local counsel isn't unusual," Kevin Brown, managing director of corporate communications at MBIA, said in an email. "They provide advice in situations where state law may come into play and can also appear in court when needed."
Sidley Austin has consistently been ranked in the top 10 in bond counsel by par value of deals. The firm was counsel to over $2.5 billion of deals for the first half of 2013.
Assured Guaranty, which has $2.2 billion exposure, has retained Winston & Strawn LLP, the bond insurer confirmed.
Ambac Assurance Corp., a bond insurer that emerged from bankruptcy this year, said earlier this month that the proposal put forth by Detroit is harmful to the city and its taxpayers. Ambac has $170 million in exposure to Detroit GO bonds, the company said in the July 8 statement.
Ambac has retained lawyers from the Washington, D.C. and New York offices of Arent Fox LLP, according to court documents. The company has also retained local Michigan representation by Schafer and Weiner, PLLC.
Syncora Guarantee Inc has retained legal counsel from Kirkland & Ellis LLP, the law firm that on Tuesday announced the hiring of Robert Khuzami, the former head of enforcement at the Securities Exchange Commission. Syncora has been embroiled in a lawsuit with Detroit prior to the bankruptcy proceedings over casino revenues. The inactive bond insurer also hired Michigan-based McDonald Hopkins PLC.
Federal Guaranty Insurance Co. retained counsel by Weil Gotshal & Manges, Reuters reported on Tuesday. FGIC did not return calls for confirmation.
Berkshire Hathaway Assurance Corp, which has $901 million in exposure where it wrapped over another insurer according to S&P, did not have court filings showing legal representation by press time.
The city's position will be defended by Jones Day and Miller Canfield Paddock and Stone. Clark Hill PLC is representing the pension funds.
Southfield, Michigan-based Erman Teicher Miller Zucker & Freedman, PC will represent Detroit Fire Fighters, Police Officers, Lieutenants and Sergeants, and Command Officers Associations, according to court documents.
American Federation of State, County & Municipal Employees, the largest union in the U.S. with over 1.6 million working and retired members, has retained Lowenstein Sandler LLP of New Jersey, as well as two local Michigan firms.
The International Union, commonly known as the UAW, which represents over 900,000 active and retired workers from municipal corporations, manufacturers and state governments, has retained New York lawyers from Cohen Weiss & Simon LLP, court filings show.
Merrill Lynch Capital Services Inc and UBS AG have hired Michigan-based Warer Norcross & Judd LLP, while Deutsche Bank has retained New York lawyers from Katten Muchin Rosenman LLP, according to court documents.
Nuveen Asset Management and BlackRock Financial Management, which oversee funds with hodings of Detroit debt, have retained Kramer Levin Naftalis & Frankel LLP and Carson Fischer PLC for legal services, court filings show.
Court documents also show individuals and groups of retirees seeking to protect their pensions have hired lawyers in the case, as well as companies like General Motors.
Reporter Caitlin Devitt contributed to this story.
