Creditors can’t force Detroit to sell its art collection to cover their claims, the city said on the first day of a trial over its proposal to eliminate more than $7 billion in debt in the biggest U.S. municipal bankruptcy, Bloomberg News reported today. “Unsecured creditors have no rights” to be paid with art proceeds or any other city asset, Bruce Bennett, a lawyer for Detroit, said yesterday, attacking the main complaint by bond insurers who may be forced to make up investor losses imposed by the plan. Municipal debt investors should have known when they lent the city money that the only way to force Detroit to pay them was to sue and win a court order raising property taxes, said Bennett, a partner at the Jones Day law firm. That couldn’t be done without driving landowners away, he said. Bankruptcy Judge Steven Rhodes has set aside seven weeks to hear arguments and evidence for and against the plan before he decides whether it’s feasible and fair.
http://www.bloomberg.com/news/print/2014-09-02/detroit-bankruptcy-trial…
In related news, Bankruptcy Judge Steven Rhodes yesterday denied motions by two bond insurance companies that sought to block Detroit from presenting certain evidence at a key hearing on the city's plan to exit bankruptcy, Reuters reported. Judge Rhodes said that while he rejected the pretrial motions by Syncora Guarantee Inc. and Financial Guaranty Insurance Co., the companies were not precluded from bringing up their objections during the confirmation hearing on Detroit's debt adjustment plan. While Detroit has settled with most of its major creditors, including the city's two pension funds, Syncora and FGIC have emerged as its biggest hold-out creditors. Both guaranteed payments on $1.4 billion of pension debt the city is seeking to void and both are facing recoveries of just pennies on the dollar. Attorneys for the insurers argued that their clients would be harmed during the hearing if Detroit were allowed to bring up matters that the insurers were blocked from investigating.
http://www.reuters.com/article/2014/09/02/usa-detroit-bankruptcy-eviden…