CHICAGO — Detroit wants a March 20 trial on its proposed settlement with its interest-rate swap counterparties, the city's attorneys said in a court hearing Wednesday.
U.S. Bankruptcy Judge Steven Rhodes said he would consider the issue, according to local reports.
Syncora Guarantee, Inc., the bond insurer that wraps a chunk of the swaps, is expected to challenge the settlement, which is the third the city has attempted to have confirmed by the bankruptcy court. Syncora, joined by other bond insurers and major creditors, opposed the previous two deals, which the judge also rejected as too costly to the city.
Rhodes Wednesday asked Syncora attorney Stephen Hackney whether the insurer plans to challenge the newest settlement. Hackney seemed reluctant to confirm the challenge with certainty.
"You're not going to settle, let's get to it," Rhodes said, according to the Detroit News.
"I'm not sure," said Hackney.
"Seriously, come on, let's just get to it," Rhodes said.
"I think there is a likelihood there may be an objection," Hackney said. "We have serious concerns."
Detroit attorney Robert Hertzberg told Rhodes that the settlement is key to the city's plan of debt adjustment. The deal calls for the city to pay the two swap counterparties, UBS AG and Merrill Lynch Capital Services Inc., $85 million in exchange for access to casino revenues and the banks' approval of the debt adjustment plan.
Most of the $85 million would be paid after the city's bankruptcy exit.
The banks' approval of the plan would give the city an impaired accepting class, allowing it to pursue a cramdown plan for the rest of its creditors if necessary.
"It drives the plan," Hertzberg told the judge, referring to the agreement. "I believe the court will approve it but if for some reason it didn't, we need to find out what the alternatives are and we need to know now."
Hertzberg also said that Detroit emergency manager Kevyn Orr would testify at the settlement hearing.
Rhodes said he would issue a written ruling on the matter.
In another hearing on Wednesday, Rhodes signaled he would slightly modify his fast-track schedule for a plan confirmation hearing, now set for June 16. The judge last week scheduled a series of hearings over the next several months leading up to the June 16 trial on the plan. All Detroit's major creditors, led by bond insurers, opposed the schedule as too speedy. Rhodes said Wednesday he would issue a revised scheduling order.