CHICAGO -- At least two bond insurers in the Detroit bankruptcy case will now enjoy the exclusive right to vote on the city's bankruptcy exit plan in place of individual bondholders.
Bankruptcy Judge Steven Rhodes, who oversees the case, issued orders Wednesday granting insurers the right on a handful of claims.
The orders apply to Assured Guaranty Corp. and National Public Finance Guarantee Corp.
Rhodes authorized Assured to be the sole party authorized to vote claims on the Assured-insured unlimited-tax general obligation bonds.
National now has sole voting power on the Detroit Water and Sewerage Department bonds and ULTGO bonds that it insures.
Rhodes has not yet issued an order for Ambac Assurance Corp., which insures some of the city's ULTGOs and has also asked for exclusive voting power.
Detroit is suing to invalidate the COP debt, which it says was illegally issued in the first place. The current plan of confirmation proposes an alternative settlement, which would mean recovery levels of less than 40%.
FGIC asked the court for the exclusive voting right on the plan, and COPs holders have challenged the insurer on the issue.
But the two parties agreed that resolution of that issue is, at this point, "unnecessary, as no party hereto intends to vote in favor" of the plan or the city's settlement offer, according to a court brief filed Wednesday.
They will all get a vote to reject the plan, but for the purposes of vote tabulation and other technical reasons, FGIC's vote will be the operative one, the brief said.
If the city proposes a greater recovery or new plan for the COPs, the parties agreed to consult about a new vote.
COP holders include Hypothekenbank Frankfurt AG, Deutsche Bank AG, Dexia Credit Local, and Stone Lion Capital Partners LP, among others.
Last week, an Ad Hoc Committee of DWSD bondholders filed a statement agreeing not to contest Assured's exclusive right to vote and make the election for the Assured-insured bonds, and no one objected to the ULTGO voting claim by the June 24 deadline.
