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Bankruptcy Judge Steven Rhodes indicated yesterday that the current timetable for finishing Detroit’s case might be unrealistic given the many disputes outstanding, raising questions about whether Detroit can exit bankruptcy before the end of its emergency manager’s term, the New York Times reported today. Judge Rhodes made the observation in a hearing after saying that he had heard that the state had promised to give Detroit some money — but only if the city could get him to approve its bankruptcy exit plan by the end of September. He said that state lawmakers needed to understand he could not guarantee meeting that deadline. Judge Rhodes concern stems over the large stack of objections to Detroit’s bankruptcy plan that piled up in the courthouse this week in response to a deadline. For months, a team of mediators has been trying to negotiate out-of-court settlements to Detroit’s many obligations, and until recently it seemed to be having remarkable success, particularly with the so-called grand bargain, which proposed to use the city’s famous art collection to raise $816 million for retirees’ pensions.
http://dealbook.nytimes.com/2014/05/15/detroit-bankruptcy-deadline-may-…

In related news, a bond insurer wants the chance to fight Detroit’s effort to cancel $1.4 billion in pension debt, Bloomberg News reported today. The insurer, Financial Guaranty Insurance Co., along with investors who would be wiped out by the plan, wants to take part in a lawsuit Detroit filed to cancel the debt, which was issued in 2005 and 2006 to prop up public worker pensions. FGIC and the investors claim that a trustee now opposing the suit won’t represent their interests adequately. FGIC faces $1 billion in claims over pension bonds if the city succeeds in throwing out the debt, Edward Soto, an attorney for the bond insurer, told U.S. Bankruptcy Judge Steven Rhodes in Detroit yesterday. Canceling the debt will free up money to pay other creditors, said Chris DiPompeo, one of the city’s attorneys. Letting FGIC and the investors participate in the lawsuit would make the case more complex and may disrupt the city’s plan to seek approval of its debt-adjustment proposal in July, he said.
http://www.bloomberg.com/news/print/2014-05-15/detroit-creditors-seek-t…

Additionally, Bankruptcy Judge Steven Rhodes refused to give some of Detroit's creditors unfettered access to art works and related documents in order to pursue a plan to increase the pot of money available for bankrupt Detroit to pay its debts, Reuters reported yesterday. Bond insurance companies Financial Guaranty Insurance Co. and Syncora Guarantee, as well as European banks and others had asked the U.S. Bankruptcy Court to direct the city and the Detroit Institute of Arts (DIA) to cooperate with their efforts to assess the art work in an effort to develop offers to monetize all or some of it. Judge Rhodes declined to force the city to cooperate with the effort, turning down a request to remove art work from the walls of the DIA for appraisal purposes. But he said that DIA was willing to give creditors access to works not on display.
http://www.reuters.com/article/2014/05/15/usa-detroit-bankruptcy-idUSL1…

Stockton, Calif.’s plan to exit bankruptcy by paying retired city workers more than some bondholders is being fought by the same law firm that helped Detroit craft a similar proposal to resolve its debt woes, Bloomberg News reported today. In closing arguments in Sacramento today, James Johnston of the Jones Day law firm is to argue that his client, Franklin Resources Inc., is being treated unfairly because Stockton is offering only 1 percent of what it owes the company’s funds, while public worker pensions will be paid in full. Stockton, a city of 298,000 people about 80 miles east of San Francisco, filed for bankruptcy in 2012 after spending too much on downtown improvement projects and property-tax revenue plunged in the housing crisis. Creditors filed $1.18 billion in claims. After months of negotiations, it reached deals with most creditors, including bond insurer Assured Guaranty Corp. and current and retired workers. The city is asking Bankruptcy Judge Christopher Klein to approve a plan that continues paying the California Public Employees’ Retirement System the full amount it’s owed. San Mateo, Calif.-based Franklin says CalPERS should be treated like any other creditor and face cuts.

Detroit's three automakers are mulling a request by the city's art museum to help it raise money for a key component of Detroit's plan to restructure its debt and exit bankruptcy, Reuters reported yesterday. Under an $816 million so-called grand bargain, the Detroit Institute of Arts would contribute $100 million to ease pension cuts on the city's retirees and avoid a sale of art works to pay city creditors. The rest of the money would come from philanthropic foundations and the state of Michigan, where a $350 million contribution over 20 years or a $195 million lump sum payment needs legislative approval.

The political wrangling over Detroit’s bankruptcy restructuring plan intensified yesterday when the U.S. government, Oakland and Macomb counties (Mich.) filed official objections to the plan, the Detroit Free Press reported today. Separately, bond insurer Syncora said it plans to call Gov. Rick Snyder, state Attorney General Bill Schuette and former Detroit Mayor Dave Bing to testify during a summer trial about the case. The disputes over the future of the Detroit Institute of Arts and the Detroit Water and Sewerage Department (DWSD) served as the centerpiece for objections from several creditors. A group of major water and sewer bondholders also objected to the plan, adding a new legal obstacle to the city’s attempt to emerge from bankruptcy by mid-October. Oakland County accused Detroit emergency manager Kevyn Orr’s restructuring team of “putting the water and sewerage systems at risk” by considering transferring the assets to an outside authority in exchange for lease payments that could help reduce the city’s debt and provide revenue that could be reinvested in services. The U.S. government yesterday also said that it would oppose the city’s restructuring plan until its objections can be resolved. Attorneys for the U.S. objected on the grounds that the city owes $112 million to the Department of Housing and Urban Development, though the city says it owes $90 million. They also said that the city has failed to guarantee that it will follow Environmental Protection Agency guidelines during its restructuring. U.S. Bankruptcy Judge Steven Rhodes will conduct a confirmation trial starting July 24 to decide whether the plan is fair to creditors and feasible.

Legislation introduced yesterday in the Michigan House of Representatives would tie state money key to Detroit's bankruptcy exit plan to oversight and other conditions, Reuters reported today. Detroit's plan for dealing with $18 billion of debt and emerging from the biggest municipal bankruptcy in U.S. history depends on $816 million pledged to ease the impact of pension cuts on retired city workers and avoid a sale of city art work to raise money for creditors. The so-called grand bargain includes $350 million in state money that Michigan Governor Rick Snyder (R) has asked lawmakers to approve. Philanthropic foundations and the Detroit Institute of Arts pledged the rest of the money. Under the legislation, Michigan would make a single upfront payment of nearly $195 million, instead of $350 million spread over 20 years. The money would be taken out of the state's rainy day fund and paid back over 20 years with proceeds from Michigan's share of a national settlement with U.S. tobacco companies.

A special Michigan legislative committee will consider Governor Rick Snyder's proposal to allocate state funds as part of Detroit's plan to get out of bankruptcy court, Reuters reported yesterday. Michigan House Speaker Jase Bolger (R) said that the newly created bipartisan House Committee on Detroit's Recovery and Michigan's Future will take up a legislative package. Detroit's plan for dealing with $18 billion of debt and exiting the biggest municipal bankruptcy in U.S. history depends on money pledged to ease the impact on retired city workers and avoid a sale of city art work to raise money for creditors. The $816 million funding package includes $350 million in state money that Snyder has asked lawmakers to approve. Philanthropic foundations and the Detroit Institute of Arts pledged the rest of the money. Bankruptcy Judge Steven Rhodes on Monday approved a document that will be sent to the city's thousands of creditors for them to vote on the debt adjustment plan. The approved final version of the disclosure statement allows Michigan to make a single upfront payment of about $195 million instead of $350 million spread over 20 years.
http://www.reuters.com/article/2014/05/06/usa-detroit-bankruptcy-legisl…

In related news, the first six months of Detroit's historic bankruptcy case cost the city $36 million in fees and expenses for a team of lawyers and consultants, according to a quarterly report filed late Tuesday by a federal court-appointed fee examiner, Reuters reported yesterday. About $22 million of that amount represented the tab for professional services in the latest quarter covering October through December. Costs will likely mushroom for the next reporting period of January through March, which included the city's filing and subsequent revision of a plan to adjust $18 billion of debt and exit the biggest municipal bankruptcy in U.S. history that was filed on July 18.
http://www.reuters.com/article/2014/05/07/usa-detroit-bankruptcy-fees-i…

Bankruptcy Judge Steven Rhodes yesterday approved a key supporting document for Detroit's plan to adjust $18 billion of debt and exit the biggest municipal bankruptcy in U.S. history, Reuters reported today. Judge Rhodes ruled that the latest version of the disclosure statement Detroit filed with the court earlier on Monday contains "adequate information" for creditors. He also prohibited the city from making anything but "non-substantive or immaterial changes" to the document. The approval marks another hurdle cleared by the bankrupt city as it plans by May 12 to begin soliciting votes on the debt plan from its thousands of creditors.

The group representing the largest block of Detroit's retired workers on Friday agreed to accept the city's proposed cuts to their pension benefits, the latest in a string of deals the city has struck in an effort to resolve its historic bankruptcy, Reuters reported on Friday. The board of directors for the Detroit Retired City Employees Association, which represents 8,000 retired civilian workers, voted to support the city's plan of adjustment, according to the mediators appointed by the federal bankruptcy judge overseeing the case. Under the deal, contingent on full funding of the so-called Grand Bargain to aid retired city workers, non-uniformed city retirees would accept a 4.5 percent reduction in benefits and the elimination of cost-of-living-adjustment increases to their benefits. They would also have a voice in the voluntary employee beneficiary association that is planned for managing retiree health care. Previously, the group representing retired police and firefighters agreed to back the city's adjustment plan, as had the boards for the two independent pension systems for both groups. Under their deal, public safety retirees will not have their pensions reduced, though COLAs would be cut to 1 percent.

General Motors Co. is asking those suing it over ignition-switch issues to voluntarily halt those lawsuits, according to documents filed ahead of a bankruptcy court hearing today on the issue, the Wall Street Journal reported today. The lawsuits, which seek damages over things such as lower car value and loss of use of a vehicle, should be stayed within 10 days, GM said in a letter yesterday to U.S. Bankruptcy Judge Robert Gerber, as the bankruptcy court decides whether GM can be held liable for these issues. If the parties suing refuse, they should be required to file documents with the bankruptcy court by May 25, and GM will respond by June 10.

The California Public Employees Retirement System (CalPERS) said that a ruling by a judge in Detroit that federal bankruptcy law takes precedence over state law may threaten the soundness of public pension systems as a whole, Bloomberg News reported yesterday. CalPERS, the largest state-run pension system in the U.S., filed a friend-of-the-court brief yesterday in the federal appeals court in Cincinnati, which has been asked to consider a challenge to Detroit’s eligibility for bankruptcy protection. Bankruptcy Judge Steven Rhodes ruled last year that Detroit was entitled to creditor protection under chapter 9 of the U.S. Bankruptcy Code and could try to alter the terms of workers’ pensions. The decision, which would let a bankrupt municipality fail to meet its pension obligations in spite of state prohibitions, was “wrong on several levels,” CalPERS said.