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The Detroit Institute of Arts is prepared to sue to prevent the sale of its collection if Detroit's plan for exiting bankruptcy is not approved, the museum's chief operating officer told the bankruptcy court yesterday, Reuters reported. When Detroit filed for the largest-ever U.S. municipal bankruptcy 14 months ago, the museum began preparing for possible litigation to keep its art works from being sold to pay city creditors, museum COO Annmarie Erickson told the court. Some city creditors have contended that the art is a city asset that can be sold or monetized to enhance payouts to creditors. The Detroit Institute of Arts and Michigan's attorney general have countered that the collection cannot be legally sold to satisfy the city's debts. In January, court mediators brokered a deal known as the "grand bargain" which led to pledges from foundations, the art museum and the state of Michigan to raise more than $800 million over 20 years to ease cuts to city pensions. In return, the museum's assets would be held by a perpetual charitable trust.

The Michigan Strategic Fund board gave final approval yesterday for the sale of up to $450 million of 30-year revenue bonds for a downtown Detroit arena that will be home to the National Hockey League's Detroit Red Wings, Reuters reported yesterday. The financing plan calls for $250 million of tax-exempt bonds backed by increases in tax collections on real estate and personal property from the development. The bonds will be priced through underwriter Merrill Lynch. Another $200 million of variable-rate taxable bonds backed by arena concession fee payments will be privately placed with Comerica Bank. The Detroit Downtown Development Authority, which will own the arena, will hedge interest rate risk on the bonds through a swap agreement with a yet-to-be named counterparty.

Bankruptcy Judge Steven Rhodes ruled yesterday that an expert witness that he picked will testify on the feasibility of Detroit’s debt adjustment plan without restrictions, Reuters reported yesterday. Judge Rhodes said that Martha Kopacz, a senior managing director at Phoenix Management Services in Boston, is qualified to give her expert opinion, noting that her "specialized knowledge will help the court to understand the evidence and to determine whether the city's plan of adjustment is feasible." Detroit's Police and Fire Retirement System and General Retirement System had filed a motion to exclude Kopacz's testimony relating to the pension systems, contending that she lacks qualifications on those matters and testifying about the pension funds was beyond the scope of her appointment. In the wake of Monday's evidentiary hearing that put Kopacz on the stand for questioning, Rhodes concluded that her opinions are based on sufficient facts or data and are the product of reliable principles and methods. Judge Rhodes added that Kopacz will also address whether the assumptions supporting the city's cash-flow projections, as well as revenue, expense and plan payment forecasts are reasonable.

With key players in Detroit's historic bankruptcy case locked in marathon mediation sessions, the pressure is on bond insurer Financial Guaranty Insurance Co., the last major holdout creditor, to settle with the city, Reuters reported on Friday. Judicial mediator Gerald Rosen has ordered the city and some of its major creditors including FGIC to keep talking until they come to an agreement. Another deadline looms outside of the court process: Kevyn Orr, the city's emergency manager, is expected to end his term on Sept. 29. Detroit's surprise settlement earlier this week with the other major bond insurer, Syncora Guarantee Inc., in addition to prior deals with pension funds, unions, retirees and some bondholders could mean FGIC may have missed its opportunity to recoup a significant portion of the $1.1 billion it has on the line from insuring Detroit debt. Syncora, which pegs its claim at about $400 million, worked out a three-part deal involving city-owned land and contracts. As part of the agreement, Syncora's lease of the Detroit part of a tunnel connecting to Canadian town Windsor would be extended, the company would reap most of a public parking garage's revenue, and a Syncora subsidiary could gain ownership of six downtown lots to develop. There is no valuation of the insurer's recovery from those assets.

The cost of Detroit's historic bankruptcy has reached $126 million and counting, surpassing the bills the big automakers faced when they were in similar straits, the Wall Street Journal reported on Saturday. An internal report on fees to outside advisers shows costs have roughly grown by four times since December when the city reported the total bill at nearly $28 million. The city's leading law firm on the case already has charged $47 million. City officials describe the nation's largest municipal bankruptcy case as entering its final phase with the hope of exiting by year's end. The trial phase of the bankruptcy is under way and expected to stretch into October.

A federal judge yesterday ordered ongoing mediation in Detroit's historic bankruptcy over a potential settlement between the city and one of its fiercest creditors, and added holdout creditor Financial Guaranty Insurance Co. to the list of parties whose attendance is required, Reuters reported yesterday. U.S. District Judge Gerald Rosen, the chief mediator in the city’s bankruptcy case, ordered that mediation, which began yesterday, will also take place today and will continue "day-to-day thereafter as deemed necessary, until released by the mediators." The city and Syncora Guarantee Inc, the bond insurer that had been the fiercest holdout creditor in the case, notified the bankruptcy court on Tuesday that they had reached a settlement in principle. Sealing that deal would leave FGIC, another bond insurer, as the only major holdout creditor left in the Detroit bankruptcy. Both Syncora and FGIC faced recoveries of 10 cents on the dollar or less in the bankruptcy as other creditors including the city's pension funds reached deals. U.S. Bankruptcy Judge Steven Rhodes on Wednesday put Detroit's case on hold until Monday in the wake of the potential deal.

The fate of Detroit’s watershed settlement with Syncora Guarantee Inc. may hinge on whether the bond insurer can win concessions from other creditors, including Bank of America Corp. (BAC) and retired city workers, Bloomberg News reported yesterday. The agreement, announced in a court filing on Sept. 9, would remove a big obstacle from Detroit’s path to resolving its record municipal bankruptcy and cutting more than $7 billion in debt. The deal with Syncora also leaves fellow bond insurer Financial Guaranty Insurance Co. as the only major creditor opposed to Detroit’s program. Earlier this year, Bank of America’s Merrill Lynch unit and UBS AG agreed to take less than they were owed by Detroit on soured interest-rate swaps, potentially triggering their right to collect insurance from Syncora. The New York-based insurer thinks its settlement with Detroit can’t go forward unless the banks give up their right to insurance. Detroit’s representatives, on the other hand, take the position that Syncora can still drop its objections to the city’s debt-reduction plan and go ahead with the settlement no matter what UBS, Bank of America and other creditors decide.

Detroit and one of its last hold-out creditors, Syncora Guarantee Inc., have reached an agreement in principle over the city's plan to adjust its debt and exit bankruptcy, Reuters reported today. The city and the bond insurance company asked the bankruptcy court to suspend an ongoing confirmation hearing on the plan until Friday so they can "address certain conditions and logistics." In a separate filing yesterday, Bankruptcy Judge Steven Rhodes said that he would hear the motion to delay this morning. Syncora, which insured some of the city's $1.4 billion of pension debt and related interest-rate swaps, emerged as Detroit's fiercest opponent in the biggest-ever municipal bankruptcy the city filed in July 2013. The company and its legal team are "hopeful the deal will be finalized in the next 48 hours," said James H.M. Sprayregen, an attorney from Kirkland & Ellis who represents Syncora.
http://www.reuters.com/article/2014/09/10/usa-detroit-bankruptcy-syncor…

In related news, Detroit and its suburbs agreed to create a regional water authority to serve two-fifths of Michigan residents as part of a deal that will make it easier to end the biggest municipal bankruptcy in U.S. history, Bloomberg News reported yesterday. “There has been 40 years of conflict between city and suburbs over water,” Detroit Mayor Mike Duggan said yesterday. Three suburban counties have been fighting the city’s proposal to extract tens of millions of dollars from its water department, claiming it would trigger rate increases and prevent needed repairs. The deal ends the counties’ opposition to the city’s bankruptcy-exit plan, Duggan said.
http://www.bloomberg.com/news/print/2014-09-09/detroit-new-water-agency…

The law firm shepherding Detroit through the biggest-ever municipal bankruptcy has charged the city just over $26 million, according to a report yesterday from a court-appointed fee examiner, Reuters reported. The supplemental report adds $3 million in fees and nearly $83,000 in expenses billed in March by Jones Day, the former law firm of Detroit's state-appointed emergency manager, Kevyn Orr. Those amounts were not included in the January-March quarterly report fee examiner Robert Fishman submitted to U.S. Bankruptcy Court on Aug. 5. The addition of the March numbers brings Jones Day's total billing from July 2013 to March 2014 to $25.1 million in fees and $1 million in expenses. It also brings the total price tag for all of Detroit's professional services in the historic case and reported so far by the fee examiner to about $55 million.

Detroit’s municipal computer systems are “beyond fundamentally broken” and holding back the city’s recovery, its chief information officer testified, Bloomberg News reported yesterday. The antiquated desktop computers can take 10 minutes to start up, and basic software is “generations behind,” Beth Niblock, the official, told a federal judge today as the city started its second week of a trial over a plan to reduce its $18 billion debt burden. Niblock was Detroit’s third witness in favor of the plan. All three said old technology is hampering recovery. Under emergency manager Kevyn Orr, the city is pouring millions into new systems that will take years to install and make fully operational. The city’s debt-cutting plan would help fund new computers, buses, police cars and fire equipment by paying creditors, including bondholders and retired city workers, less than they are owed. Detroit plans to spend more than $80 million on information technology by 2023, according to court documents.