DETROIT (Reuters) - A U.S. judge said on Monday he would rule during the week of Nov. 3 on Detroit’s plan to adjust its debts and exit the biggest-ever municipal bankruptcy.
Bankruptcy Judge Steven Rhodes said he would issue an oral ruling in court late that week on whether the plan is fair to creditors and feasible for the city to carry out. He also set Oct. 27 for closing arguments in the plan’s confirmation hearing, which began Sept. 2.
The wrap-up of the historic bankruptcy comes after Detroit reached settlements with all of its major creditors, including its two retirement systems and companies that guaranteed payments on the city’s bonds.
Michigan Governor Rick Snyder appointed Jones Day lawyer Kevyn Orr as Detroit’s emergency manager in the spring of 2013, after the once-thriving industrial hub had suffered years of population, economic and fiscal declines. That July, Orr filed the largest municipal bankruptcy in U.S. history and moved relatively fast to forge a plan for adjusting $18 billion of the city’s debt and obligations.
The string of settlements came with a cost, with outside consultants charging $67.7 million in fees through March 31, according to a report filed in court on Friday. More than a third of that, $26.15 million, has gone to Jones Day, which represents Detroit in court.
Orr told Rhodes last week that he had asked the restructuring professionals to make a $5 million contribution to the city and “put a little money in the pot.” Detroit Mayor Mike Duggan has expressed concerns that a significant portion of a loan to cover the costs of exiting bankruptcy would go to paying consultants.
On Monday, Heather Lennox of Jones Day, a lawyer for Detroit, told Rhodes that two smaller claims with unions representing about 330 public library and six Cobo Hall convention center retirees had been resolved. She added, however, that the court-appointed retirees’ committee still had some issues.
Rhodes pounced on the committee’s lawyer, Sam Alberts from law firm Dentons.
“Really? Seriously?” Rhodes said. “I don’t want an explanation. I want you to resolve it.”
The judge on Monday also rejected a claim from the American Federation of State, County and Municipal Employees union, whose members contended they were owed $174 million from pension reforms enacted in 2011.
The city on Tuesday will present witnesses to testify about a deal struck with bond insurer Financial Guaranty Insurance Co [FGIC.UL] last week, according to Lennox.
The holders of $1 billion of Detroit pension certificates of participation (COPs) that were insured by FGIC will probably update the court on whether they will opt into the settlement, which includes a large development deal and financial recovery. [ID:nL2N0SC1JJ]
On Wednesday, Martha Kopacz, an expert witness tapped by Rhodes to assess the feasibility of Detroit’s debt adjustment plan, will testify.
Additional reporting by Lisa Lambert in Washington; Editing by Lisa Von Ahn