CHICAGO - With two new settlements in hand, Detroit attorneys used a bankruptcy hearing Monday morning to trumpet the city's progress.
The city is expected to unveil its fourth update to its plan of debt adjustment on Friday, reflecting details of the new settlements, reached Friday and Monday.
U.S. Bankruptcy Judge Steven Rhodes, who is overseeing the case, was expected to consider final approval of the disclosure statement, a key bankruptcy document that accompanies the plan of confirmation, at the Monday hearing.
But the ruling was delayed to allow the city to update its plan to incorporate latest settlements and finalize voting procedures.
"It sometimes seemed impossible. The sun is beginning to shine on Detroit," Jones Day attorney David Heiman said, according to the Detroit News and other local reports of the court hearing. "This is a momentous occasion as we embark on what we hope will be a relatively smooth confirmation process."
Heiman added that, with the new settlements, the city is in an "awesome position."
Rhodes called the series of settlements "extraordinary and unprecedented in the history of bankruptcy," reports said.
Heiman said he thought the confirmation trial, scheduled to begin July 24 and perhaps last several days, could be over in a day.
Meanwhile, Syncora Guarantee, Inc., one of a handful of remaining creditors challenging the city's plan, won a small victory at the hearing.
Rhodes ruled that the Michigan Attorney General's office must give the bond insurer documents related to the Detroit Institute of Arts.
The fate of the fine art at the city owned museum has been a central question in the bankruptcy case; Syncora, along with Financial Guaranty Insurance Co., wants to force the city to consider bids on selling or privatizing the city's art in order to boost creditor recoveries.
Syncora on Friday filed a motion requesting communications between the DIA and the AG's office for the two months before Attorney General Bill Schuette issued an opinion that the art could not be sold.
"The art has been a sort of noteworthy, highly publicized part of the case and from our standpoint a very important part of the case," Syncora attorney Stephen Hackney told the judge. "The city is proposing to address the issues surrounding the art collection in a way, from our standpoint, that yields far less value."
Rhodes ruled that, contrary to the state's and DIA's arguments, the documents are not protected by privilege, and that they did not have a common legal interest.
In other news from the hearing, the state said it was hoping to get legislation enabling the so-called grand bargain, an $820 million public-private financing package for the city's pension debt, introduced and passed by mid-June.
Rhodes also encouraged the city and three neighboring counties to continue negotiations over creation of a new regional authority to take over the Detroit Water and Sewerage Department.
The latest two settlements reached over the weekend add to a series of agreements hammered out over the last few weeks.
Early Monday the bankruptcy mediators announced the city had reached a deal with a coalition of unions over collective bargaining agreements over the next five years. Employees still need to sign off on the settlement.
The mediators did not release details of the plan, though local reports said it featured "significant" wage restoration for union members who had their salaries cut in 2010 and 2012. The coalition includes AFSCME, the city's largest union and previously one of its toughest court challengers.
"The unions are critical partners in the effort to bring our city back. We are on the front lines," AFSCME official Ed McNeil said in a statement. "We know operationally what needs to be done to save money and improve services. This agreement in principle offers an opportunity for the unions to provide regular input and guidance to city management."
On Friday, the city reached a deal with a court-appointed committee of retirees over retiree health care benefits.
The settlement with the retiree committee is largely over the city's OPEBs, which are benefits other than pensions, and are considered among the least secure of Detroit's estimated $18 billion of debt.
The agreement calls for the retirees to recover only 10% to 13% of their retiree health care benefits, according to the latest disclosure statement. The city will increase to $450 million from less than $300 million the amount it puts into a health benefits account, and has also agreed to cap to 20% the amount of annuity money it will try to claw back from retirees who may have been overpaid by the retirement systems.
In recent weeks, Detroit has nailed down deals with its unlimited-tax general obligation bondholders through the bonds' insurers, and over police, fire and general employees' pensions. Unlimited-tax GO bondholders would see a 74% recovery though the insurers will make full on-time payments to bondholders.
Police and fire workers would have no pension cuts and 55% cost-of-living increase reductions and general employees would have their pensions cut 4.5% and total elimination of their COLA benefits.
No settlements have yet been reached with the city's limited-tax GO holders, the holders of $1.4 billion of pension certificates of participation, insurers FGIC or Syncora, or the union representing police and fire.
