CHICAGO — Michigan law firm Miller Canfield Paddock and Stone PLC is expected to serve as local outside counsel to Detroit as the city embarks on a large-scale restructuring under a new emergency financial manager.
The city, under Mayor Dave Bing and the Detroit City Council, hired Miller Canfield last December to handle lawsuits and other issues tied to the financial stability agreement between the city and the state. The firm is likely to remain now that the stability agreement has been replaced by emergency financial manager Kevyn Orr.
Gov. Rick Snyder appointed Orr, 54, as EM Thursday. He begins his new job March 25, and could assemble a new restructuring team but is expected to continue to work with many of the outside consultants that have been hired over the last year under the stability agreement.
Jones Day will serve as the city's national restructuring counsel and work with Miller Canfield. Bing hired Jones Day Monday.
Orr, who was a Jones Day attorney specializing in bankruptcy and restructuring law, resigned from the firm Wednesday.
Before the city hired Miller Canfield, the city council rejected the $300,000, three-year contract, but the state made the firm's hire one of the conditions of the release of bond proceeds from a state-controlled escrow account.
Together the firms will help navigate the restructuring and negotiations with creditors.
The law firms are part of the city and state team that is negotiating with counterparties on eight interest-rate swaps that hedge roughly $800 million of Detroit pension debt. The appointment of an emergency manager triggered a termination event on the swaps — previous downgrades triggered similar events — and the parties continue in negotiations to reach an agreement without the city having to make the roughly $400 million termination payment, officials said.
Orr begins his new job just three days before the state's new emergency manager law for distressed local governments takes effect on March 28. Public Act 436 replaces Public Act 72 and broadens emergency managers' powers, giving them the ability to unilaterally terminate or amend contracts. The new law also makes bankruptcy a more viable option, though the move still requires the governor's approval.
Though he specialized in bankruptcy during his career, Orr said last week that he hopes to avoid a Chapter 9 filing by successfully negotiating new terms with the city's creditors.