Detroit's municipal bond creditors did not object to the city's historic bankruptcy petition by Monday's deadline, but they may be gearing up for a bigger battle down the road that could pit payments on city bonds against pension payments, Reuters reported yesterday. While public labor unions, the city's two pension funds, retirees, vendors and individuals filed a slew of objections to Detroit’s filing, bondholders, including mutual funds, and bond insurers were absent from the list. Patrick Darby, an attorney at Bradley Arant Boult Cummings LLP, said that bond creditors may have concluded that there are no other alternatives for Detroit but bankruptcy. As the bankruptcy proceeds, bondholders will vie against pension funds and other creditors for payments from the city. Detroit's largest unsecured creditors are its two pension funds, which have claims totaling nearly $3.5 billion in unfunded liabilities. Pension funds and unions dispute the estimate, claiming that Kevyn Orr, Detroit’s state-appointed emergency manager, has overstated the underfunding.
