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Detroit emergency manager Kevyn Orr’s office on Friday announced an agreement to extend current health care coverage for retired city workers through Feb. 28, the Detroit Free Press reported on Saturday. The extension delays the city’s plan to cut off health care coverage for retirees at the end of the year. Retirees do not have to do anything to maintain their medical, prescription and dental coverages, Orr’s office said. Retirees were told last month they would either shift to Medicare or receive a $125 monthly stipend to pay for health care. Retiree groups filed a lawsuit to halt the new plan, which was to take effect Jan. 1.

The financial adviser for Detroit's two pension funds testified in federal court yesterday that the city did not negotiate prior to filing the largest municipal bankruptcy in U.S. history in July, Reuters reported yesterday. The adviser's testimony came on the eighth day of an eligibility trial as Detroit tries to prove to Bankruptcy Judge Steven Rhodes that it is insolvent and that it acted in good faith when it deemed negotiations were just impractical. Bradley Robins, who is advising the funds, said he viewed a June 14 city report, which proposed offering unsecured creditors, including the pension funds, pennies on the dollar "as a shot across the bow…. I took it as the city putting the creditors on notice that it wanted to begin the process of wanting to have a discussion," he said. But Robins said no negotiations transpired, despite a handful of meetings between the creditors and the city before it filed for bankruptcy on July 18. Lawyers for the city, the unions, the retirees and the pension funds opposed to the bankruptcy are set to begin their closing arguments today.

Standard & Poor's Ratings Services on Wednesday assigned preliminary BBB and BBB-minus ratings to a $1.74 billion sewer warrants debt offering by Alabama's bankrupt Jefferson County expected this month, Reuters reported yesterday. The offering, which is meant to replace $3.1 billion of defaulted sewer debt, is central to Jefferson County's negotiated plan to end what is the nation's second-largest municipal bankruptcy after Detroit. S&P said that it had given a preliminary underlying BBB rating to Jefferson County's proposed series 2013-A senior-lien sewer revenue current interest warrants, series 2013-B senior-lien sewer revenue capital appreciation warrants, and its series 2013-C senior-lien sewer revenue convertible capital appreciation warrants. A BBB rating means that the county’s proposed debt is perceived to have adequate capacity to meet financial commitments, but still has vulnerabilities. The $500 million of senior lien bonds will be insured by Assured Guaranty Municipal Corp., which S&P rates AA-minus, according to the preliminary official statement for the deal expected to be priced through Citigroup the week of Nov. 18.

Detroit sought court permission to borrow $350 million to help fund its record municipal bankruptcy, a loan that Moody’s Investors Service Inc. called “unprecedented,” Bloomberg News reported yesterday The city, in a bankruptcy court filing, said that most of the loan would be used to buy out interest rate swaps that have cost the city about $50 million a year. Moody’s, in a report for investors released yesterday, said that the city’s proposed use of financing known as a debtor-in-possession loan is unusual compared to corporate bankruptcies. “The impact of the proposal on the city’s existing creditors, as well the city’s near-term financial position and long-term financial recovery, are difficult to assess at this point given the number of contingencies that remain,” Genevieve Nolan, a Moody’s assistant vice president, said. The annual $12 million payments on the proposed loan would be far less than the $50 million the city would save each year by buying out the swaps, Detroit told U.S. Bankruptcy Judge Steven Rhodes in its filing yesterday.

The city of Detroit will delay its plan to move retiree healthcare onto the Affordable Care Act exchanges because of problems that are plaguing the roll-out of the online insurance marketplaces, Reuters reported yesterday. Detroit planned to provide all city retirees who are not eligible for Medicare with a stipend to purchase health coverage on the Affordable Care Act to take effect on January 1, said Heather Lennox, the city lawyer. Instead, Detroit will delay the plan a month, extending the current coverage through January 31. Emergency Manager Kevyn Orr announced changes to current and retiree healthcare plans last month. Detroit has $5.7 billion in liabilities for healthcare and other retiree benefits, which accounts for about half of the city's $11.5 billion in unsecured debt. The city will provide most retirees under 65, who are not yet eligible for Medicare, $125 per month to purchase coverage on the healthcare exchanges. Retirees with disabilities will get $200 per month. Retirees over 65 will choose from three Medicare Advantage plans, in which the city will pay most or all of the premiums. They could also enroll in a Medicare Part D drug plan for which Detroit will pay the premiums.

Former Michigan Treasurer Andy Dillon said yesterday that he was "very skeptical" that Detroit would be able to cut an out-of-court deal with its creditors to avoid bankruptcy after reviewing the city's June 14 report that said unsecured creditors would only receive pennies on the dollar, Reuters reported yesterday. Dillon, who resigned last month, testified on the seventh day of a trial to determine whether Detroit is eligible to reorganize its finances under bankruptcy protection. Dillon played a key role in the lead up to Detroit's July 18 bankruptcy filing by serving on review teams that scrutinized the city's finances. In a July 9 email to Michigan Governor Rick Snyder that was cited in court yesterday, Dillon wrote that there were "creative options" for Detroit's public pension shortfall, but he testified yesterday that he did not pursue any of those solutions because the pension deficit was "relevant but not a driving factor" behind the city's trip to U.S. Bankruptcy Court. Detroit has $18.5 billion in debt and other obligations, which the city and state say includes a $3.5 billion unfunded pension liability, a figure that is disputed by bankruptcy opponents in the case. The opponents, who include the city's labor unions, retirees and pension funds, are trying to prove that Detroit officials failed to try to negotiate a deal with them and other creditors ahead of the July 18 bankruptcy filing.

Detroit retirees, unions and pension funds continued to press their case on Monday that the city did not negotiate in good faith before it filed for the largest municipal bankruptcy in U.S. history in July, Reuters reported yesterday. Kevyn Orr, Detroit's state-appointed emergency manager, testified yesterday that he did not mean to mislead city retirees when he said during a June 10 public meeting that pension rights were "sacrosanct" under Michigan's constitution. Orr, who wrapped up four days of testimony yesterday, has repeatedly argued that pension benefits must be diminished as part of Detroit's financial restructuring as U.S. bankruptcy law trumps the Michigan constitution, which protects public pension benefits from being slashed. Bankruptcy Judge Steven Rhodes is not expected to make a decision on Detroit's eligibility until next week at the earliest.

Detroit Emergency Manager Kevyn Orr said yesterday that he could force a legally binding settlement on the city's creditors if they were unwilling to accept a proposed restructuring plan in bankruptcy court, Reuters reported yesterday. The "cram down" provision of federal bankruptcy law allows a judge to approve a plan of restructuring over the objections of creditors, so long as at least one impaired class of creditors votes to confirm it. "We hope to reach a negotiated solution even now," Orr said as he took the witness stand on the fifth day of a trial to determine whether Detroit is eligible for chapter 9 municipal bankruptcy. "If we don't, we will address that situation and certainly 'cram down' is an opportunity available to us." If Bankruptcy Judge Steven Rhodes, who is overseeing the case, finds Detroit eligible for bankruptcy, the city will need to submit a plan of readjustment that must be approved by the court.

Before Detroit filed its record-setting bankruptcy, it fought a “running gun battle” with Syncora Guarantee Inc. to protect its best source of cash from the bond insurer, said Kevyn Orr, the city’s emergency manager, Bloomberg News reported yesterday. That dispute, other court fights and tough negotiations with unions and additional creditors persuaded Orr to choose a bankruptcy filing, he testified yesterday at a trial in Detroit to determine whether the city can remain under court protection. To remain in bankruptcy, the city must show that it’s insolvent, that it’s entitled under state law to file for bankruptcy, that it tried to negotiate with creditors or was unable to do so, and that it intends to file a plan to adjust its debts.

Michigan Governor Rick Snyder defended Detroit's bankruptcy filing on Monday, stating in court that he followed the state and federal constitutions while addressing fiscal issues that had built up in Detroit for more than half a century, Reuters reported yesterday. Snyder said that the Michigan and U.S. constitutions do not prevent actions that he took, even though the Michigan constitution prohibits diminishing pension payments to retired employees. Detroit's emergency manager, Kevyn Orr, has indicated that cuts to pension benefits would be part of a Detroit bankruptcy restructuring plan. Unions, pension funds and retirees are opposing Detroit's bankruptcy petition, and Bankruptcy Judge Steven Rhodes will rule on Detroit's eligibility after a multi-day proceeding expected to last into next week.