CHICAGO — U.S. Chief District Judge Gerald Rosen, the top mediator in Detroit's bankruptcy case, has ordered the city into talks with water and sewer revenue bondholders, one of the few holdout creditors in the case.

The mediation session is set for June 24 at 10 a.m. The meeting will take place at the New York office of the Jones Day law firm, Detroit's counsel in the case.

Rosen will be there.

In addition to the city, the state of Michigan through its Department of Treasury or Michigan Finance Authority, is also required to send a representative, according to the order.

Rosen ordered the following creditors to attend: U.S. Bank, NA, bond trustee; bond insurers Assured Guaranty Municipal Corp., Financial Guaranty Insurance Corp., MBIA/National Public Finance Guarantee Corp., and Berkshire Hathaway Reinsurance Group, all of which insure the bonds; and bondholders Black Rock Financial Management, Eaton Vance Management, Fidelity Management & Research Co., First Southwest Co., Nuveen Asset Management, and Franklin Advisors, Inc.

Detroit has roughly $5.3 billion of outstanding water and sewer debt.
The Detroit water and sewer holders and holders of $1.4 billion of the city's pension certificates of participation, as well as Syncora Guarantee Inc., are the only creditors not to reach debt-adjustment settlements with the city.

Assured and National recently sent notices to the bondholders asking them to reject the city's confirmation plan.

The recommendation to bondholders comes after Assured and National filed formal court objections to the city's proposed treatment of the Detroit Water and Sewerage Department bonds.

Detroit Emergency manager Kevyn Orr wants to repay in full the principal on the bonds, but refinance the debt to achieve savings in part by stripping out protections, reducing interest rates and subordinate debt service to other payments.

Orr wants to privatize the massive Detroit Water and Sewerage Department by spinning it off into a regional authority or leasing it to a private entity. The system serves nearly half of Michigan and is one of the largest in the country. But it suffers from weak financial performance, high capital needs, and lost the city of Flint, its second-largest customer, in April when the city moved to its own system.

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