CHICAGO — Syncora Guarantee Inc. on Monday launched the latest salvo in a rising war of words with Detroit, accusing the bankrupt city of setting its pensioners and financial creditors at each other's throats.
The skirmish comes after Syncora asked Detroit for financial information about its retirees. The request sparked a protest from the city, which said the "billion-dollar insurance company" is trying to harasses pensioners.
The city last week asked the bankruptcy court for a
Syncora, one of the staunchest opponents to Detroit's proposed bankruptcy exit plan, insures interest-rate swaps that hedge some $800 million of
$1.4 billion of pension certificates of participation, as well as roughly $300 million of the COPs themselves.
Detroit has filed a lawsuit to invalidate the COPs, and has settled with the interest-rate swaps counterparties in a way that could leave Syncora still on the hook.
Syncora requested the retiree information in May as part of a broader request for various documents. Detroit and the insurer reached agreement on 49 of 50 issues, according to court documents, but the request for detailed information was "beyond the pale," the city argued its request for a protective order. "The only possible explanation for this outrageous request is that Syncora is attempting to gain a litigation advantage by harassing, oppressing and embarrassing the city and its retirees," it argued. In a
"In this lone remaining issue, the city spied another opportunity to highlight — for the court and the press — its animosity towards Syncora," the insurer said in the brief. Citing Detroit's "inflammatory" request for a protective order, Syncora said "the city once again suggests that its Chapter 9 case is not a judicial proceeding — but rather a political one, being waged principally through the newspapers."
The insurer said it seeks details in order to determine what information the city relied on "to discriminate in favor of the retirees." The information includes the location and financial position of the retirees. The insurer agreed not to seek names.
Detroit has made the financial position of its retirees central to its plan of confirmation, which imposes deeper cuts on financial creditors than its retirees, Syncora argued. "The city's hypocrisy on this point is patent; it deplores Syncora's discovery request in the most inflammatory of terms, even as it seeks to take advantage of the same data Syncora seeks."
Detroit argued that's irrelevant to the case, and Syncora, agrees in this case. "The personal hardship that retirees or bondholders will suffer is not a cognizable basis under the bankruptcy code to discriminate between them," it said. That approach would lead to a "dizzying array of mini-trials" to decide which creditors would suffer the most, Syncora said.
