CHICAGO — Bond insurer Financial Guaranty Insurance Co. has asked to delay the Detroit bankruptcy trial for at least a week to give it time to prepare a new legal strategy in light of the city's proposed settlement with Syncora Guarantee Inc.
FGIC filed the court request late Sunday. It asked U.S. Bankruptcy Judge Steven Rhodes to suspend the trial on the city's confirmation plan until at least Sept. 22.
Insurers Syncora and FGIC were the last holdout creditors opposing the confirmation plan, and the two had coordinated much of their legal strategy, such as who would question certain witnesses. FGIC insures $1.1 billion of Detroit's pension certificates of participation. Syncora holds $400 million of the certificates. Syncora was set to question 11 of the witnesses the city was to call to defend its confirmation plan, according to FGIC's request for a delay.
Syncora announced on Sept. 9 it had reached an agreement in principal with the city. On Sept. 10, Rhodes suspended the trial until Sept. 15, to give the parties time to hammer out final details of the deal. The city said at the Sept. 10 hearing that it would have to file a seventh amended confirmation plan to reflect the Syncora settlement.
The chief mediator in the case, US Chief District Judge Gerald Rosen, also ordered FGIC into mediation sessions with Syncora and other creditors on Friday to try to reach a settlement.
As of late Sunday, terms of a final deal between Syncora and the city was not yet announced, and FGIC had apparently not reached its own settlement with the city.
"The creditors will need time to review whatever final settlement documents are proposed by the City and Syncora, as well as any plan amendments and revised disclosure statement regarding such settlement, in order to understand the agreement between these parties, analyze its effect on the creditors, and formulate any objections thereto," FGIC said in its brief. "Whenever the final documentation is filed, the creditors will need a reasonable amount of time to review and analyze it, and the confirmation hearing should at that time be further adjourned to give the creditors an opportunity to submit their supplemental objections in writing. In the meantime, a week extension now will give the Creditors a head start on this work," the brief said. "Although counsel for the creditors have worked diligently since the adjournment last week to reorganize their case and determine how to address the remaining witnesses, additional time is necessary to complete this analysis and adequately prepare for trial."
Syncora and FGIC planned to call University of Chicago economics professor Kevin Murphy to refute the city's argument that there's a link between pension cuts and employee performance. FGIC asked Syncora and the city to allow it to still call the witness, but the request was denied, according to FGIC. The insurer now needs more time to bring in a new expert to "provide this important testimony," the brief said.
Joining FGIC in its delay request is the hedge funds that now own the bulk of the pension COPs, as well as the Macomb County Interception Drain Drainage District, which also opposes the city's plan.
Syncora's settlement features a mix of cash, bonds and city assets, including vacant city land, a lease on a downtown parking garage and a 20-year lease extension on operation of a tunnel between Detroit and Windsor, Ontario.
