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Monday, January 13, 2014 - 12:00

Detroit Pension Funds Push for Expedited Bankruptcy Appeal

Submitted by webadmin on Fri, 2014-01-10 00:00

Detroit’s pension funds continued to push this week for an expedited appeal of the city’s bankruptcy eligibility and ability to slash pensions while negotiations between the city and its creditors intensified over a deal to shed billions in debt, the Detroit News reported today. The General Retirement System and Police and Fire Retirement System shot back on Wednesday at the city’s attempt to keep its favorable eligibility ruling out of the hands of judges on the Sixth Circuit Court of Appeals’ bench. “The city’s transparent effort to avoid any appellate review of the critically important eligibility question is legally unjustified and breathtakingly unfair to the tens of thousands of workers and retirees who devoted their lives to public service to Detroit and now depend on their accrued pension benefits, as well as employees and retirees across the state and nation who may be affected by this ruling,” the pension funds wrote in a brief filed on Wednesday with the Sixth Circuit. The pension funds’ appellate attorneys filed the brief after the city’s attorneys argued against an expedited appeal in a Monday filing with the Cincinnati-based appellate court. Detroit’s retirees want to be insulated from cuts to more than $18 billion in city debt, including an estimated $3.5 billion long-term liability in the two pension funds.

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Friday, January 10, 2014 - 12:00

Detroit Manager Freezes Pension Fund Creates 401k-Type Plan

Submitted by webadmin on Tue, 2014-01-07 00:00

Detroit Emergency Manager Kevyn Orr has frozen the pension fund for some of the city's workers, replacing it with a 401k-type plan, according to an executive order obtained by Reuters yesterday. The pension freeze, which took effect on Dec. 31, only affects Detroit's General Retirement System, which covers non-public safety workers. The action closes the pension fund to any new or rehired employees and freezes benefit accruals for current workers. It also stops worker contributions to the pension and annuity savings funds and ends cost-of-living adjustments for pension payments made to retirees. As of Jan. 1, the order created a defined contribution plan for affected workers.

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Tuesday, January 7, 2014 - 12:00

Rules Proposed to Curb Muni-Bond Advisers

Submitted by webadmin on Tue, 2014-01-07 00:00

U.S. securities regulators, under pressure from Congress to prevent a repeat of the financial debacles witnessed in municipalities like Detroit and Jefferson County, Ala., are set to propose a series of rules to rein in advisers that help states and localities raise cash in the $3.7 trillion municipal-bond market, the Wall Street Journal reported today. The Municipal Securities Rulemaking Board, a self-regulator for the muni-bond market, is expected this week to propose the first of a long-delayed set of rules for municipal advisers aimed at better protecting taxpayers from the types of complex transactions that soured during the financial crisis. Many unsophisticated local governments didn't fully understand those transactions, which primarily involved so-called interest-rate swaps to hedge against higher borrowing costs. The advisers targeted by the rules are firms, sometimes affiliated with banks, hired to work with states and localities to time, market and price municipal-bond deals and related transactions. But most advisers are unaffiliated with banks and were previously unregulated. Lawmakers and regulators say they pushed to increase oversight of municipal advisers in the wake of tumult in localities like Jefferson County, where officials and Wall Street firms repeatedly used interest-rate swaps as a vehicle for kickbacks and other types of fraud. The 2010 Dodd-Frank financial law requires the advisers to register with the Securities and Exchange Commission and adhere to MSRB rules.

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Tuesday, January 7, 2014 - 12:00

Detroit Manager Sought SEC Probe of Banks over Interest Rate Swaps

Submitted by webadmin on Mon, 2014-01-06 00:00

Detroit Emergency Manager Kevyn Orr testified that the city asked a U.S. regulator to consider bringing charges against two banks for costly interest-rate swaps that factored in the city's record-setting municipal bankruptcy case, Reuters reported on Friday. Orr said that Detroit asked the U.S. Securities and Exchange Commission to investigate its deals with UBS AG and Merrill Lynch Capital Services, a unit of Bank of America , for interest rate swaps to hedge risk on some of the $1.4 billion of pension debt Detroit sold in 2005 and 2006. The city thought there were "serious questions" about whether it owed the banks anything at all, Orr testified, and Detroit weighed trying to invalidate the swaps. But officials decided chances of prevailing in court were only "more or less 50/50," so it decided to bargain with the banks instead. Orr testified before Bankruptcy Judge Steven Rhodes at a hearing about a Christmas Eve deal to end the swap agreements for $165 million plus fees. That represents a 43 percent discount for Detroit, steeper than one initially proposed. Judge Rhodes, who is overseeing Detroit's bankruptcy case, sent the city and the banks back to the bargaining table after postponing a hearing about the earlier deal to terminate the swaps for $230 million, or 75 cents on the dollar.

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Monday, January 6, 2014 - 12:00

Creditors Fight Detroits New Swaps Settlement

Submitted by webadmin on Fri, 2014-01-03 00:00

Several major creditors are expected to contest a new settlement between Detroit and two global banks to pay off a disastrous debt deal when a trial over the proposed settlement resumes today, the Detroit Free Press reported today. The city agreed on Dec. 24 to a new settlement with UBS and Bank of America Merrill Lynch to pay off a pension debt interest-rate transaction called “swaps” with $165 million in newly borrowed cash. The new deal, brokered in a federal mediation session with U.S. District Chief Judge Gerald Rosen, amounted to a $65 million discount over a previous settlement of $230 million. The original swaps settlement collapsed last month after Bankruptcy Judge Steven Rhodes questioned the city’s decision to pay $230 million to settle the $293 million swaps transaction, suggesting that he deal might be too generous to the banks. Bond insurer Ambac Assurance, which has been arguing for months that the swaps transaction was illegal and the settlement was a bad deal, yesterday filed a fresh objection to the new settlement.

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Friday, January 3, 2014 - 12:00

Detroit Mediators Ask Judge to Approve Swaps Deal

Submitted by webadmin on Tue, 2013-12-31 00:00

The mediators who oversaw negotiations between Detroit and two banks to strike a deal to end a costly interest-rate swap agreement recommended yesterday that the judge in charge of Detroit's bankruptcy approve the agreement, arguing that the deal is a critical first step toward resolving the historic case, Reuters reported yesterday. The city struck a deal with UBS AG and Bank of America Corp's Merrill Lynch Capital Services on Dec. 24 to end the interest-rate swap agreements at a 43 percent discount. The negotiations happened after Bankruptcy Judge Steven Rhodes, who is overseeing the case, encouraged Detroit to negotiate better terms for the deal. Judge Rhodes still must approve the agreement and he will hold a hearing on Jan. 3 to consider the arrangement.

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Tuesday, December 31, 2013 - 12:00

Detroit Pension Funds Seek Expedited Bankruptcy Appeal

Submitted by webadmin on Mon, 2013-12-30 00:00

Detroit's two pension funds have asked the U.S. Court of Appeals for the Sixth Circuit to hear an expedited appeal of a judge's ruling that the city is eligible for bankruptcy protection, Reuters reported on Friday. The General Retirement System and the Police and Fire Retirement System, Detroit's two largest unsecured creditors, filed the appeal with the Sixth Circuit on Thursday. The expedited appeal would bypass the U.S. District Court for the Eastern District of Michigan. Earlier this month, Bankruptcy Judge Steven Rhodes ruled that Detroit met the federal requirements for bankruptcy because the city, with $18.5 billion in debt, was insolvent and could not negotiate with all of its creditors. Judge Rhodes also ruled that pension benefits could be cut as part of Detroit's restructuring efforts. The pension funds, and others objecting to the Detroit bankruptcy, have maintained that Michigan's constitution protects pensions from being slashed. In its appeal, the pension funds argued that Detroit's plan to cut pensions could set a precedent and cause other troubled U.S. cities to also cut pension benefits as a way to reduce debt.

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Monday, December 30, 2013 - 12:00

Detroit Reaches Deal to End Interest-Rate Swaps

Submitted by webadmin on Thu, 2013-12-26 00:00

The city of Detroit reached an agreement on Tuesday with two banks to end a costly interest-rate swap agreement, a significant step as the city negotiates with creditors to put together a plan to exit the largest municipal bankruptcy in U.S. history, Reuters reported yesterday. Detroit will pay $165 million, plus up to $4.2 million in costs, to end the interest-rate swap agreements with UBS AG and Bank of America Corp.’s Merrill Lynch Capital Services at a 43 percent discount. The new agreement, which was reached after Bankruptcy Judge Steven Rhodes asked the city to negotiate better terms than it first proposed, will save the city about $65 million. As part of the arrangement, Detroit will also take out a $285 million loan from Barclays PLC to pay to end the swaps. It will use $120 million of that toward improvements to services in the city, which is hampered by $18.5 billion in debt.

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