The fate of Detroit’s watershed settlement with Syncora Guarantee Inc. may hinge on whether the bond insurer can win concessions from other creditors, including Bank of America Corp. (BAC) and retired city workers, Bloomberg News reported yesterday. The agreement, announced in a court filing on Sept. 9, would remove a big obstacle from Detroit’s path to resolving its record municipal bankruptcy and cutting more than $7 billion in debt. The deal with Syncora also leaves fellow bond insurer Financial Guaranty Insurance Co. as the only major creditor opposed to Detroit’s program. Earlier this year, Bank of America’s Merrill Lynch unit and UBS AG agreed to take less than they were owed by Detroit on soured interest-rate swaps, potentially triggering their right to collect insurance from Syncora. The New York-based insurer thinks its settlement with Detroit can’t go forward unless the banks give up their right to insurance. Detroit’s representatives, on the other hand, take the position that Syncora can still drop its objections to the city’s debt-reduction plan and go ahead with the settlement no matter what UBS, Bank of America and other creditors decide.
