CHICAGO -- Detroit alerted the federal bankruptcy court Wednesday of plans to issue a subpoena to the Bond Buyer for information about the city's controversial $1.4 billion pension certificates of participation sale.
The COPs transaction won the Bond Buyer's Midwest Regional Deal of the Year award in 2005. The city said in its court filing that it wants the newspaper to produce documents concerning the nomination and consideration of the transaction for the national award and the midwest honor.
Detroit in January filed a lawsuit trying to overturn the debt, arguing it was issued illegally in the first place through sham entities set up solely to avoid the city's state-imposed debt limits.
Syncora Guarantee Inc. and Financial Guaranty Insurance Co., which insure the certificates, as well as the holders of the debt, are fighting the lawsuit, which is running in parallel to the bankruptcy case.
Bond Buyer editor in chief Michael Scarchilli declined to comment on the subpoena.
Detroit's Jones Day attorneys also said they plan to depose a series of Detroit-area public officials on issues related to the proposed privatization of the Detroit Water and Sewerage Department as well as the feasibility of the city's bankruptcy exit plan.
Also Wednesday, Assured Guaranty Corp. announced it plans to serve subpoenas to three public finance professionals on issues related to the Detroit water and sewer department.
The insurer plans to question Lee Donner, a managing director at First Southwest Company; Theodore Sobel, the head of public finance at Ramirez & Co.; and Thomas Gavin, from Robert W. Baird & CO. Inc.
Gavin was the city's longtime financial advisor. First Southwest owns some of the water and sewer bonds.
Bond insurer Financial Guaranty Insurance Co. said in June it will subpoena Michigan Gov. Rick Snyder and one of his top aides, as well as Siebert Brandford Shank Co., LLC managing director Sean Werdlow as part of their case. Siebert acted as the city's counterparty on several interest-rate swaps that hedged $800 million of the COP, and Werdlow was Detroit's finance director who helped craft the COPs transaction.
Syncora Guarantee Inc., as well as the DWSD and COPs holders, will take Detroit emergency manager Kevyn Orr's deposition as part of their challenge.
