A plan to cut pension benefits previously thought sacrosanct for 30,000 workers and retirees may tip Detroit into bankruptcy as Emergency Manager Kevyn Orr negotiates over $17 billion in debt and obligations, Bloomberg News reported yesterday. Getting dispassionate bondholders to take partial payment will be easier than wresting retirement cuts from unions, said Ken Schneider, a Detroit bankruptcy lawyer. He said that Orr’s June 20 meeting with unions and creditors meant to frame the talks may presage the largest U.S. municipal bankruptcy. Orr’s plan will test retirees’ contention that Michigan’s constitution protects vested pension benefits. No such shield exists, the state-appointed manager’s advisers said on June 14 when they unveiled his plan to restructure Michigan’s largest city, a former auto-manufacturing powerhouse that lost one-quarter of its population since 2000.
http://www.bloomberg.com/news/print/2013-06-18/detroit-s-recovery-plan-…
In related news, Fitch Ratings dropped the rating on about $1.5 billion of Detroit bonds to the lowest level of D from C, citing the city's failure to make a June 14 debt service payment, Reuters reported yesterday. The rating downgrade affects taxable pension obligation certificates of participation (COP) Detroit sold in 2005 and 2006, according to Fitch. Detroit's emergency manager on Friday announced the cash-strapped city would stop making payments on its unsecured debt, starting with the pension COPs.
http://www.reuters.com/article/2013/06/17/usa-detroit-fitch-idUSL2N0ET1…