Hopefully for the City of Detroit, this process will speed up:
Detroit — The city and dozens of creditors launched negotiations Tuesday in hopes of striking deals that could speed the Detroit bankruptcy case.
Emergency Manager Kevyn Orr and about 90 lawyers representing city pension funds, unions, retirees, the state and bondholders attended the first joint mediation session at federal court in downtown Detroit. The head mediator, Chief U.S. District Judge Gerald Rosen, urged creditors, many of whom complained the city failed to negotiate before filing Chapter 9 bankruptcy in July, to reach agreements to restructure debt, saying the future of the city and region is at stake.
“This is about the future of the city and this region,” Rosen said. “Open your minds to areas where we can reach agreements.”
Rosen was flanked by his team of mediators, including several judges from across the country who will lead negotiations with various creditors involved in the biggest municipal bankruptcy case in U.S. history. Negotiations will continue Tuesday and in coming weeks before all parties return to Detroit for additional talks Oct. 8-9.
In an effort to keep Detroit’s bankruptcy from getting mired in protracted and expensive litigation, U.S. Bankruptcy Judge Steven Rhodes has promoted the use of mediation to settle disputes over $18 billion in city debt and the city’s limited to resources to pay its bills and long-term obligations.
The mediation sessions could help Detroit craft a plan of adjustment with creditors that is essential to the city emerging from bankruptcy court. First, however, Rhodes must determine whether the city is eligible for Chapter 9 bankruptcy relief; a trial is set for late October.
“As difficult and challenging as the issues are, the alternative to an agreed upon plan of adjustment…is horrendous,” Rosen said.
The mediation sessions are closed to the public and confidential.
Rosen likened Tuesday’s joint mediation session to a time-honored auto industry tradition marking the start of negotiations between automakers and the United Auto Workers.
“I think of this like the handshake across the table at the beginning of the bargaining session,” Rosen told the group. “I am under no illusions. We are not going to reach any earth-shaking agreements today, but we are going to begin discussions.”
Orr sat in the front row of Rosen’s courtroom with his legal team. Behind him were rows of lawyers representing creditors, some of whom are being asked to accept as little as 10 cents on the dollar.
Rosen will be the point-person for negotiations with the city and state and shuttle among talks with various creditors. He announced the following assignments for his mediation team Tuesday:
■ Portland, Ore.-based U.S. Bankruptcy Judge Elizabeth Perris will mediate a dispute between the city and bondholders, including those opposed to a proposed settlement of about $250 million in debt on interest rate swaps with banking giants UBS and Bank of America.
The city is seeking a quick resolution to the dispute in an effort to slash about $50 million in annual debt payments and free up $11 million in casino tax revenue to spend on public safety services. At issue in the disputed settlement is one insurer of Detroit’s pension debt, Syncora Guarantee, which is trying to lay claim to the casino money.
“This is a procedure; it’s not going to happen overnight,” Perris told the group.
She joined the other mediators Monday on a bus tour throughout Detroit to see the city and its challenges up close.
“That makes me all the more motivated about the mediation being critical,” she said. “Being mired in years of litigation is not an option. That is not going to benefit the city or the parties.”
The Detroit News: http://www.detroitnews.com/article/20130917/METRO01/309170085/1409/METRO/Detroit-creditors-launch-bankruptcy-case-talks
