The U.S. judge overseeing Detroit's historic bankruptcy dropped hints on Tuesday on what he wants to hear in the city's closing statements and what he may be scrutinizing in creditor settlements, Reuters reported yesterday. The city's emergency manager also testified in federal court yesterday that a recent settlement with the last major holdout creditor was important for keeping elements of Detroit's debt-adjustment plan together. Bankruptcy Judge Steven Rhodes said that he wants the city to explain its settlements with creditors, its exit financing, the "reasonableness" of consultants' fees and the business justification for discrimination among classes of unsecured creditors in closing arguments scheduled for Oct. 27. Rhodes is conducting a hearing that started on Sept. 2 to determine whether the plan for adjusting $18 billion of debt and exiting the largest-ever municipal bankruptcy is fair to creditors and feasible for the city to carry out. FGIC, which has a $1.1 billion exposure from insuring Detroit pension debt, would receive a 13 percent recovery in the plan under the settlement reached last week. Detroit Emergency Manager Kevyn Orr testified that without that settlement, the court might have rejected the restructuring plan and thereby scuttled all the settlements the city has forged. He added that Detroit's two retirement systems would have been under threat of lawsuits related to the pension debt.
