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A restructuring expert testified in bankruptcy court yesterday that Detroit's relatively fast move through municipal bankruptcy has resulted in costly creditor settlements and too little emphasis on fixing the city's broken operations, Reuters reported yesterday. Still, Martha Kopacz, who was appointed by Judge Steven Rhodes to assess the viability of Detroit's plan to restructure $18 billion of debt and obligations, concluded that the plan is feasible and that its underlying revenue and other assumptions are reasonable. "It's likely that the city of Detroit after confirmation of the plan of adjustment is able to sustainably provide basic services to the city without a significant probability of default," she testified. She gave the plan a passing grade, saying problems could emerge from the city council's budget, low training of staff, pension funding and other issues. Kopacz, a senior managing director at Phoenix Management in Boston, also said that the money the city will borrow to help it exit the largest-ever municipal bankruptcy and begin rebuilding "will enable the city to resolve its bad borrowing procedures and bad financial decisions of the past."

The U.S. judge overseeing Detroit's historic bankruptcy dropped hints on Tuesday on what he wants to hear in the city's closing statements and what he may be scrutinizing in creditor settlements, Reuters reported yesterday. The city's emergency manager also testified in federal court yesterday that a recent settlement with the last major holdout creditor was important for keeping elements of Detroit's debt-adjustment plan together. Bankruptcy Judge Steven Rhodes said that he wants the city to explain its settlements with creditors, its exit financing, the "reasonableness" of consultants' fees and the business justification for discrimination among classes of unsecured creditors in closing arguments scheduled for Oct. 27. Rhodes is conducting a hearing that started on Sept. 2 to determine whether the plan for adjusting $18 billion of debt and exiting the largest-ever municipal bankruptcy is fair to creditors and feasible for the city to carry out. FGIC, which has a $1.1 billion exposure from insuring Detroit pension debt, would receive a 13 percent recovery in the plan under the settlement reached last week. Detroit Emergency Manager Kevyn Orr testified that without that settlement, the court might have rejected the restructuring plan and thereby scuttled all the settlements the city has forged. He added that Detroit's two retirement systems would have been under threat of lawsuits related to the pension debt.

Bankruptcy Judge Steven Rhodes said yesterday that he would rule during the week of Nov. 3 on Detroit's plan to adjust its debts and exit the biggest-ever municipal bankruptcy, Reuters reported yesterday. Judge Rhodes said that he would issue an oral ruling in court late that week on whether the plan is fair to creditors and feasible for the city to carry out. He also set Oct. 27 for closing arguments in the plan's confirmation hearing, which began Sept. 2. The wrap-up of the historic bankruptcy comes after Detroit reached settlements with all of its major creditors, including its two retirement systems and companies that guaranteed payments on the city's bonds.

A milestone agreement in Detroit’s record bankruptcy requires its last major creditors to help revitalize the city’s downtown in return for cutting their losses from a $1.4 billion pension deal that went sour, Bloomberg News reported on Friday. Financial Guaranty Insurance Co. would indirectly own and pay to redevelop the riverfront site of Joe Louis Arena -- home of the National Hockey League’s Detroit Red Wings -- which will be demolished in 2017 when a new arena opens a mile away. FGIC would also get a share of $141.4 million in new notes in a deal announced yesterday in federal court in Detroit. The agreement brings the city closer to resolving its $18 billion bankruptcy, and would put a group of creditors that includes Aurelius Capital Management LP and and BlueMountain Capital Management LLC, owed about $1.1 billion, in charge of building a hotel and retail space in a downtown that civic leaders view as a linchpin of the city’s economic recovery.

Detroit announced a settlement yesterday with its final major holdout creditor, Financial Guaranty Insurance Co., as it edged closer to exiting the biggest-ever municipal bankruptcy, Reuters reported yesterday. The settlement includes an option for FGIC to develop the Joe Louis Arena and parking garage for a mixed-use project, primarily a hotel serving the nearby Cobo Convention Center, according to Corinne Ball, an attorney at law firm Jones Day, which represents Detroit in the case. The bond insurer will also receive about $152 million in city notes, part of which will be backed by public parking revenue, as well as $19.7 million in credits it can apply for purchasing city parking assets or real estate. In return, FGIC, which has a $1.1 billion exposure from insuring the pension certificates of participation (COPs), will drop its objections to the city's plan to adjust $18 billion of debt, Ball told Bankruptcy Judge Steven Rhodes.

Detroit residents and retired public workers were given temporary control of the city’s historic bankruptcy trial to present their own case against its $7 billion debt-cutting plan, which includes pension reductions, Bloomberg News reported yesterday. Bankruptcy Judge Steven Rhodes set aside today for opponents who don’t have lawyers to try to persuade him to reject the plan. With the first presentation, the usual rules and traditions that govern federal trials began breaking down. A retired city employee, Wanda Jan Hill, got to question one of Detroit’s lead bankruptcy lawyers, despite a rule generally barring attorneys from testifying about the case they’re working on. Under questioning by Hill, Heather Lennox, a partner at the Jones Day law firm, acknowledged the city didn’t warn retirees in key documents that they would have to pay interest on money clawed back from a savings plan that overpaid some workers. Detroit is nearing the end of a bankruptcy trial that began Sept. 2. Since filing the biggest U.S. municipal bankruptcy case in history in July 2013, the city has cut deals with almost all of its major creditors, including pensioners. Yesterday, the last large holdout creditor, bond insurer Financial Guaranty Insurance Co., suspended its fight with the city to try to resolve its objection to the plan. FGIC and Detroit said that they will return to court today and either announce a deal or continue the trial.

A settlement with Financial Guaranty Insurance Co, the last major holdout creditor in Detroit's historic bankruptcy case, is close and could be announced tomorrow, Reuters reported yesterday. Detroit's attorney, Thomas Cullen at law firm Jones Day, told Bankruptcy Judge Steven Rhodes that the two sides "have made substantial progress." Alfredo Perez, FGIC's attorney, asked the judge for a delay in putting the bond insurance company's two witnesses on the stand until Thursday "to see if we can have a consensual deal by that time." FGIC, which has $1.1 billion on the line from insuring Detroit pension debt, is facing the possibility of having a minimal recovery forced upon it if a settlement is not reached and Detroit's plan to exit bankruptcy wins court approval.

Detroit's bankruptcy trial starts back up today after a week-long break as holdout creditors prepare to make their case against the city's restructuring plan, the Detroit Free Press reported today. Creditors' arguments are expected to take all week, setting up closing statements in Detroit's historic bankruptcy case next Monday. Bankruptcy Judge Steven Rhodes would then decide whether to confirm Detroit's plan of adjustment, a 10-year strategy to bring the city out of its financial crisis. At the heart of the plan is a $1.4-billion investment in city services. Meanwhile, settlement negotiations are ongoing between the city and its last major creditor, bondholder Financial Guaranty Insurance Co., which has a $1.1-billion claim against Detroit.

Mediation for the last, and potentially one of the biggest, settlements in Detroit's historic bankruptcy case has moved to New York City, a Detroit spokesman said yesterday, amid a newspaper report that a potential deal with Financial Guaranty Insurance Co. (FGIC) is still days away, Reuters reported yesterday. Bond insurer FGIC is the last major objector to the largest-ever municipal bankruptcy, with $1.1 billion on the line from guaranteeing payments on city pension debt. Nearly a month ago, Detroit struck a deal with another bond insurer, Syncora Guarantee Inc., which included a financial recovery of 13.7 cents on the dollar and a bevy of real estate transactions encompassing a central parking garage, development options and a lease for part of a tunnel connecting the city to Canada. The city's lawyers have emphasized at the ongoing hearing that a settlement similar to Syncora's is available to FGIC. Court-ordered mediation on a possible settlement has moved to New York at the request of Judge Gerald Rosen, who is leading mediation efforts in the case, said Bill Nowling, spokesman for Detroit emergency manager Kevyn Orr, who is participating by telephone. Nowling added that the situation remains fluid and no deal has been reached.

Detroit has recruited top municipal and corporate executives from New York to Kentucky to run the city once it leaves bankruptcy, Mayor Mike Duggan testified as the final witness in favor of a plan to cut $7 billion in liabilities, Bloomberg News reported yesterday. The mayor described the city’s progress rebuilding services including streetlights and buses, as well as police and fire protection. One focus has been on persuading residents to begin repairing their own blighted neighborhoods. Duggan cited lessons he learned restructuring Wayne County, Mich., where he was a top executive, and as head of the Detroit Medical Center. The mayor said that he’s skeptical about the wisdom of borrowing another $50 million as city Emergency Manager Kevyn Orr proposed, which would bring its bankruptcy exit loan to $325 million. The city has the authority to borrow the extra money but isn’t required to.