Detroit’s “divide-and-conquer” campaign to build support for its plan to shrink $18 billion in debt with a recent series of creditor accords may put pressure on holdouts to settle before a bankruptcy judge decides to push it through, lawyers following the case said, Bloomberg News reported yesterday. “‘Divide and conquer’ does seem to be the strategy that the city is pursuing, which is often a fear of creditors,” said George South, an attorney with DLA Piper LLP in New York, alluding to how the city has methodically reached agreements with individual creditor groups in its quest to resolve the biggest municipal bankruptcy in U.S. history by year’s end. Under a proposal announced April 15, Detroit’s emergency manager, Kevyn Orr, agreed to pay retired city police officers and firefighters their full monthly pensions. Hours later, the pension system for general employees, such as city hall clerks and street workers, said it, too, had settled with Orr. Those accords followed an agreement last week that would pay investors who hold unlimited general obligation bonds 74 percent of what they are owed. Holders of limited GO bonds would get only 15 percent under Orr’s debt-adjustment plan.
