Regional News

Berkshire Hathaway Enters Detroit Bankruptcy Case

CHICAGO — Warren Buffett's bond insurance firm made its first appearance in the Detroit bankruptcy case with a brief court paper filed Saturday.

Detroit Friday also filed a series of objections Friday to creditors' requests for documents in the Chapter 9 case, many related to uncovering Detroit emergency manager Kevyn Orr and Gov. Rick Snyder's decisions leading to the historic filing.

Attorneys for Buffet's Berkshire Hathaway Assurance Corp. on Saturday filed a court notice of appearance and request for service. The brief notes that New York-based firm Debevoise & Plimpton LLP will act as counsel for the insurer in the case, and requests that copies of all documents related to the case be sent to the firm.

BHAC has about $400 million in exposure to Detroit's debt, mostly in sewer revenue bonds. All the BHAC insurance is a wrap on top of an original guarantee from Financial Guaranty Insurance Co. In addition to $384 million of sewer debt, the insurer also wraps a piece of the city's defaulted pension certificates, though the amount is uncertain.

On Friday, the city filed hundreds of pages of documents objecting and responding to creditors' long list of requests for documents in the case. Nearly all objections were to unions and retiree groups, who collectively filed nearly 100 requests; none were to document requests from bond market participants.

Creditors' requests and the city's objections are in preparation for a two-part trial on whether Detroit is eligible to enter into bankruptcy. U.S. Bankruptcy Judge Steven Rhodes, who is overseeing the case, has set a date of Oct. 15 and Oct. 16 for the first phase of the trial, which will center on legal objections.

Detroit's attorneys objected to all document requests on various grounds, but said the city would produce a limited amount of non-privileged information.

Unions' requests ranged from documents illuminating the steps leading up to the city's July 18 filing, to negotiations with creditors, pension-related disputes, and the city's plans for supporting its case during the eligibility trial.

City attorneys objected to "each and every one of these document requests" for being overly burdensome, too vague, subject to attorney-client privilege, irrelevant, or calling for legal conclusions, among other grounds, according to court documents.

Detroit's largest city employee union, The American Federation of State, County & Municipal Employees, Michigan Council 25 asked the city to produce all documents regarding the city's Chapter 9 filing or authorization for filing, such as Orr's authorization request sent to Snyder, Snyder's responses, as well as documents related to a possible filing created by Snyder or any member of his staff.

AFSCME also asked for a list of all financial advisors and investment bankers consulted by the city with respect to the eligibility or filing for bankruptcy, and all secrecy, confidentiality, and nondisclosure agreements tied to the case.

AFSCME's 50 document requests include a list of all of all the city's debts, with a detailed account of the amount, maturity, original contract, and "short description of efforts made to collect the debt since August 2011."

The request asks specifically for debts owed by Olympia Entertainment tied to the lease of Joe Louis Arena and Cobo Hall. Olympia is the Detroit-based company that owns the Red Wings hockey team that is in the midst of a plan to build a new bond-financed downtown arena to replace the Red Wings' current home at Joe Louis.

Detroit's attorneys objected to that request on several grounds, including that it would require the city to compile information it does not usually keep, but added the city would produce non-privileged documents to the extent they exist.

The union also asked for a list of all city assets valued at over $50,000, including those at the Detroit Institute of Art.

The Retired Detroit Police Members Association made 26 requests, many of which centered on the negotiations the city may or may not have had with other creditors leading up to the bankruptcy filing and the city's treatment of its pensions.

The association asked the city to produce all documents related to its decision to defer $108 million of current and prior pension payments, projections that future pension payments will rise, and prior year pension contributions, as well as to default on a $39.7 million pension certificate payment due in mid-June.

One request — "Please produce all documents that support the city's conclusion that there is no reasonable alternative for the restructuring of the city's operations and obligations other than through a Chapter 9 case," — was objected to by the city partly on the grounds that it's overly burdensome.




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