Bankruptcy lawyers for both the City of Detroit and its creditors can breathe a sigh of relief as foundations have announced $330 million to save Detroit’s assets.
The mediator in Detroit’s federal bankruptcy case announced this morning that local and national foundations have pledged $330 million toward an effort to shore up Detroit’s ailing pensions funds and to protect artwork at the Detroit Institute of Arts.
U.S. Chief District Judge Gerald Rosen’s statement made clear that the pledges do not by themselves mean that the city pensions and DIA art are now beyond the reach of creditors. Rather, the commitments are intended and expected to play a part in what Rosen’s statement called “an overall balanced settlement of disputes in the bankruptcy.”
In other words, there is no deal until all the various claims in the broader bankruptcy case have been settled. And the foundations’ support is contingent upon all their money going to support the twin goals of helping fill the unfunded gap in Detroit’s municipal pension obligations and protecting the DIA art collection from possible sale to pay the city’s creditors.
Despite the remaining challenges, the foundations’ support is expected to play an important part in moving such an overall settlement closer to fruition.
Detroit emergency manager Kevyn Orr has estimated that Detroit’s two municipal pension funds may be underfunded by as much as $3.5 billion, and Orr and his team have talked for months about finding a way for the DIA’s collection to be “monetized” in some way to help the city resolve its fiscal troubles.
If those two issues can be amicably resolved using foundation money, that could ease the way toward a settlement of the broader bankruptcy case.
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Rosen’s statement called the foundations’ commitment “an extraordinary and unprecedented effort” and said more foundation support was expected to be announced in the future.
A foundation leadership committee has been established to handle the details, consisting of the heads of the Community Foundation for Southeast Michigan, the Kresge Foundation, the Ford Foundation, and the John S. and James L. Knight Foundation.
So far, nine foundations have made commitments. The five other foundation making pledges are the William Davidson Foundation, Fred A. and Barbara M. Erb Family Foundation, Hudson-Webber Foundation, McGregor Fund and Charles Stewart Mott Foundation.
The Detroit Free Press: http://www.freep.com/article/20140113/BUSINESS06/301130075/DIA-pensions-Rosen-bankruptcy
