CHICAGO - All of Detroit's major creditors, including its bond insurers, Friday asked the judge overseeing Detroit's bankruptcy case to slow down his fast-track case schedule, to give creditors and the city more time to address key issues.
Syncora Guarantee Inc. also proposed in its
Syncora filed its own request for a delay. The
They asked U.S. Bankruptcy Judge Steven Rhodes to push back the trial date on the city's confirmation plan by one month, to July 16, 2014.
Syncora asked Rhodes to push the trial back three months, to Sept. 8. Detroit wants to exit bankruptcy by September, which is when emergency manager Kevyn Orr is expected to leave office.
The requests come a week after the city filed its plan for debt adjustment and disclosure statement, which outlines how the city plans to treat its estimated $18 billion of creditors and rebuild itself post-Chapter 9.
On Feb. 24, Rhodes announced an ambitious timeline that set a series of hearings and deadlines over the next three months, with a trial on the confirmation plan set for June 16. Rhodes earlier this week already rejected a similar request from creditors who asked for more time to assess the city's disclosure statement. At the time, Rhodes said the city could not afford a delay, as it could run out of money to finance the costly case.
Friday was the deadline to object to Rhodes' schedule. The creditors filed their objections late in the day.
"The commenting parties appreciate the court's desire to promote the just, speedy and inexpensive determination of this case," the main group of creditors argues in its filing. But the current schedule is "unrealistically compressed, and contains some structural and sequencing issues that should be reconsidered."
Syncora's more forcefully argued brief warns that the current schedule will just invite more litigation in the long run.
"As the largest Chapter 9 filing in history, this case involves a number of complex and unprecedented issues -- many of which are central to creditor recoveries and the plan confirmation process," Syncora argues in its brief. "Despite the significance of these issues, the current accelerated schedule requires that they all be resolved in a few months. Syncora therefore proposes that the court adopt a more deliberate schedule that permits a thorough and meaningful consideration of the following issues."
The complex issues remaining to be hashed out are: the value of the Detroit Institute of Arts collection; the size of the city's pension liability, which is disputed by the pension systems and Orr; and the assessment of the city's 10-year capital rebuilding plan, Syncora said.
Another key issue is the city's effort to create a new regional authority with its suburban neighbors, which would lease the Detroit water and sewer department, and provide annual payments to the city. Detroit has been working on the deal for months, but it has stalled, in part because the city has not yet provided the suburban partners with adequate financial information, according to some parties.
A slower schedule would allow the city to organize and present that badly needed information, Syncora argues in its brief.
"Or, alternatively, the city could explore a transaction involving private financing," the insurer said. "While such a transaction has the potential to result in a better deal for the city and its creditors, at the very least, providing the city with time to explore this deal would improve the city's negotiating leverage with the suburbs."
In related news, Rhodes late Friday also issued a ruling to disband a committee made up of unsecured creditors that was assembled by the U.S. bankruptcy trustee. It was the latest in a series of ruling favorable to the city.
