A bankruptcy lawyer for the city of Detroit started closing arguments today in Detroit’s bankruptcy trial. The bankruptcy attorney must prove to the court that the bankruptcy plan, which restructures the city’s obligations, is fair for all creditors and stakeholders.
The bankruptcy lawyer made a point to stress that this bankruptcy plan will leave the city in a positive financial light so it does not return to bankruptcy or another workout with creditors after completing this case.
The bankruptcy attorney also pointed out that Detroit’s creditors have all backed the plan after negotiations proved fruitful.
From here the bankruptcy court will take time to reflect on the plan and make a final decision on the city’s case.
A city lawyer launched closing arguments Monday in Detroit’s bankruptcy trial by defending a plan that sheds more than $7 billion in debt and shields a world-class art collection from creditors.
The speech was at times defensive and reflective as Detroit bankruptcy attorney Bruce Bennett marked the final phase of the biggest municipal bankruptcy case in U.S. history. Bennett noted the plan has won widespread support from creditors who feared deeper cuts to retiree pensions, debts and other obligations.
The Chapter 9 municipal bankruptcy plan treats creditors equitably and fairly and will let Detroit invest $1.7 billion upgrading police, fire and other city services after years of neglect, Bennett told U.S. Bankruptcy Judge Steven Rhodes.
“This is exactly the relief Detroit needed,” Bennett said before vowing that the city will not file bankruptcy again. “We’re not coming back for Chapter 18.”
Early on, Bennett defended a pillar of Detroit’s bankruptcy plan, the so-called “grand bargain” that preserves the Detroit Institute of Arts and softens pension cuts to thousands of retirees.
The city legally cannot sell its art, creditors can’t force a DIA fire sale and it is a bad idea to weaken a cultural institution that can play a role in Detroit’s revitalization, Bennett told U.S. Bankruptcy Judge Steven Rhodes.
“It is a reasonable decision for the city to want to keep a world-class art museum in the city as a potential contributor to its future,” Bennett said.
The city will spend as much as three hours trying to convince U.S. Bankruptcy Judge Steven Rhodes that he should approve the plan, which includes $1.7 billion in spending for public safety and city services. The judge will determine if the plan is feasible and in the best interest of creditors.
All but a few individual creditors have struck deals and are supporting the plan, including several hedge funds who dropped their objection to the debt-cutting plan Monday.
The hedge funds are owed $1 billion and would split $141 million in new notes as part of a bankruptcy settlement Detroit reached earlier this month with bond insurer Financial Guaranty Insurance Co.
Rhodes said he will approve or reject the plan next week.
Bennett reflected on progress made since Detroit filed bankruptcy 15 months ago after amassing $18 billion in debt. The filing capped a decades-long slide that transformed the nation’s iconic industrial town into a model of urban decline crippled by population loss, a dwindling tax base and financial problems.
The Detroit News: http://www.detroitnews.com/story/news/local/wayne-county/2014/10/27/detroit-bankruptcy-trial/17992123/
