CHICAGO — The judge in Detroit's bankruptcy case Wednesday will consider a
The hearing will likely mark the first appearance in court of a new proposal by a coalition of foundations to raise private funds to pay down the city's unfunded pension liability while protecting the city-owned art collection.
The plan, a first of its kind in Chapter 9, is being hashed out in mediation under Chief District Judge Gerald Rosen. Gov. Rick Snyder is reportedly asking lawmakers to pledge state funds — at least $350 million — to match the foundations' grants.
Few other details of the proposal have emerged from mediation, and the impact of the plan on bondholders and other unsecured creditors on par with pensioners remains unclear.
U.S. Bankruptcy Judge Steven Rhodes is also expected to hear arguments by a group of creditors who in late November filed a court brief asking for the establishment of a committee made up of creditors that would be able to weigh in on the value and proposed uses of collection at the city-owned Detroit Institute of Arts.
Creditors argue the collection is among the Detroit's most valuable assets.
Detroit emergency manager Kevyn Orr hired auction house Christie's, which in early December released a valuation of the art collection that estimated the value at between $454 million and $867 million.
Creditors want to be able to weigh in on that assessment as well as various proposals for monetizing the collection.
"By having the committee go through the market based valuation, the city won't run into problems down the road when it's trying to file its Chapter 9 plan," said a source close to the creditors' case who asked to remain anonymous. "If you do a valuation up front and engage in a process, then you've got a much better chance of getting past the confirmation down the road."
The foundations' proposal does not render the motion moot, the source said. "The foundations and Rosen seem to be shooting blind at [the value]," the source said. "That's a one-off deal that not an open market process."
Creditors filing the motion include bond insurers Financial Guaranty Insurance Company, Syncora Guarantee Inc., and Ambac Assurance Corp. as well as FMS Wertmanagement, which owns some of the pension certificates.
The city's largest union, American Federation of State, County and Municipal Employees, and a committee representing 23,000 Detroit retirees are also part of the motion.
