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One of the biggest hold-out creditors in Detroit's bankruptcy will argue next month for a dismissal of the historic case to bring about more equitable treatment of all the city's creditors, Reuters reported yesterday. Detroit's plan to adjust $18 billion of debt has been approved by most, but not all, of the city's unsecured creditors, bringing to center stage the possibility of a cramdown, where the plan could be imposed on objecting creditors if U.S. Bankruptcy Judge Steven Rhodes determines it is fair and feasible. Restructuring experts for one objector, Financial Guaranty Insurance Company, plan to testify at a critical confirmation hearing beginning Aug. 14 against the entire case, the cram down and the 'grand bargain' intended to ease pension cuts on city retirees and prevent selling Detroit's art collection.

Detroit released a revised debt adjustment plan on Friday that details the role of a post-bankruptcy monitor and sets up a reserve fund to possibly enhance recoveries for certain creditors, Reuters reported on Friday. The fifth revision of the plan filed in bankruptcy court creates a litigation trust related to Detroit's lawsuit seeking to void $1.45 billion of pension certificates of participation (COPs) sold in 2005 and 2006. Should Detroit prevail in the suit, money the city would have had to use to pay off the debt would instead be divvied up, with 65 percent going to the voluntary employees' beneficiary associations set up for city retiree healthcare costs and 20 percent going to limited-tax general obligation bondholders. A class of miscellaneous claims would receive the remaining 15 percent. Bankruptcy Judge Steven Rhodes, who has yet to take up substantive issues in the COPs lawsuit, plans to start a confirmation hearing on Detroit's plan Aug. 14.

Ambac Assurance Corp. said that its final settlement in Detroit's bankruptcy case over the treatment of limited-tax general obligation bonds that it insured for the city would result in a 34 percent recovery, plus another possible 19 percent from a litigation reserve, Reuters reported on Friday. The reserve would contain funds related to litigation over Detroit's pension debt, according to Ambac. The reserve is based on certain notes the city will use for recoveries for some of its unsecured creditors. "Ambac Assurance's share of the B notes may equate to a recovery of an additional 19 percent of its allowed claim with respect to the LTGO bonds," the bond insurer said in a statement. "If the city loses the litigation, Ambac Assurance will not get any further recovery. If the litigation is settled, Ambac Assurance may get a partial incremental recovery," it added. Detroit has asked the bankruptcy court to invalidate $1.45 billion of pension certificates of participation the city sold in 2005 and 2006.

Financial Guaranty Insurance Co. (FGIC) and Syncora said on Tuesday that they plan to fight Detroit in federal court on the grounds that the city is giving a much better deal to city pensioners and is unfairly discriminating against bondholders from whom the city has borrowed heavily, The Christian Science Monitor reported yesterday. Their complaint comes a day after two pension groups, made up of retired police, firefighters and other public workers, voted to accept slightly reduced pensions under the city's plan to restructure its crippling debt. The two insurers say that Detroit is legally bound to a $1.4 billion debt deal established in 2005. Detroit Emergency Manager Kevyn Orr has argued that the debt deal — brokered by former Mayor Kwame Kilpatrick, now in federal prison on a corruption conviction — is illegal. Orr is set to bring the debt restructuring plan before Hon. Steven W. Rhodes starting Aug. 14. It is possible that proceedings will move forward even without bondholders being in full agreement, said University of Michigan Prof. John A.E. Pottow. If there is no settlement that eliminates the need for a trial, Judge Rhodes can force cuts to creditors, or can determine that the city and its creditors need to reach a new deal.

Detroit's city workers and retirees overwhelmingly agreed to accept the city's debt-adjustment plan, according to results filed late Monday, potentially clearing the way for the struggling city to exit bankruptcy in the next few months, Reuters reported today. Documents filed in bankruptcy court show that the city's current and retired police and fire employees, along with other active and retired city workers, will accept pension reductions to help adjust $18 billion in debt in the largest-ever U.S. municipal bankruptcy case. Most bondholders rejected the plan, along with insurers that are backing some of the debt. The city declared that the "overwhelming" vote by members of its two retirement systems to accept changes to their pensions puts it on track for a coming trial to determine whether the plan is fair and feasible. That phase is scheduled to begin on Aug. 14 and will be overseen by Bankruptcy Judge Steven W. Rhodes. "The voting shows strong support for the city's plan to adjust its debts and for the investment necessary to provide essential services and put Detroit on secure financial footing," said Detroit Emergency Manager Kevyn Orr.

Detroit neighborhoods are being relit, its vacant homes are being sold off or torn down, its public transportation is cleaner and more often on schedule, and the city has renegotiated some burdensome union contracts, The Associated Press reported yesterday. In the little more than a year since state-appointed Emergency Manager Kevyn Orr made Detroit the largest U.S. city to seek bankruptcy protection, it has experienced a wide range of improvements that will factor into Judge Steven Rhodes’s decisions during next month's bankruptcy trial. A major piece could fall into place today, with the expected release of the results of a vote by creditors, including more than 30,000 retired and current city workers, on whether to accept millions of dollars in cuts. When the city filed for bankruptcy, Detroit's debt was estimated to be $18 billion, and its revenue streams were too small to keep up with basic city services. Some of the most dramatic changes were designed to save the city money and didn't need to wait for the August bankruptcy confirmation trial.

Democrats in the U.S. House are seeking to protect local-government workers in bankruptcy proceedings, responding to the record collapse in Detroit that’s poised to reduce city workers’ retirement benefits, Bloomberg News reported yesterday. A bill by Michigan Representative John Conyers, the top Democrat on the House Judiciary Committee, and three other fellow Democrats would strengthen the threshold for negotiations with workers before a filing could be approved. It would also require employees to consent to changes to contracts, including pension and health-care benefits. Detroit filed for court protection almost a year ago after decades of population decline left it unable to pay its debts. The filing led to a court fight between workers and retirees over the city’s diminished resources. Conyers said that the legislation is intended to make it tougher for localities to use bankruptcy proceedings to get out of union agreements. Two Senate Democrats — West Virginia’s Jay Rockefeller and Elizabeth Warren of Massachusetts — have also introduced legislation making it more difficult to cut retiree benefits in bankruptcy.

The Detroit Institute of Arts said yesterday that it has secured another $26.8 million in pledged donations to cover its portion of the "grand bargain" intended to help Detroit emerge from bankruptcy while sparing a sale of the museum's art works, Reuters reported yesterday. The bargain is the linchpin to the city's bankruptcy plan, providing a way for Detroit to pay its pensioners and avoid a sale of the city-owned museum's art collection that some creditors have suggested to raise cash. The deal is expected to provide more than $800 million over 20 years to retired Detroit workers, according to the institute. The DIA has agreed to pay for $100 million of the bargain, and the latest donations bring its total amount secured to $80 million. Also under the deal, philanthropic foundations have pledged $366 million over 20 years and the state of Michigan approved a lump sum payment of $195 million last month.

The federal judge overseeing Detroit’s record $18 billion bankruptcy is trying to reduce the number of legal disputes he must resolve before the start of trial on the city’s debt-adjustment plan next month, Bloomberg News reported today. Bankruptcy Judge Steven Rhodes today began two days of hearings on about a half-dozen technical matters raised by opponents of the bankruptcy, including whether the counties surrounding Detroit have a right to challenge the city’s plan. By culling the issues, Judge Rhodes is seeking to focus the trial on disputes over the basic facts underlying the city’s proposal. Detroit is trying to win court permission to cut at least $7.4 billion in unsecured debt owed to bondholders, public employees and retirees.

Detroit’s current and retired employees pleaded with the judge overseeing the city’s bankruptcy to limit the financial suffering they face from a reorganization plan that imposes $7.4 billion in cuts on them and other creditors, Bloomberg News reported yesterday. At the hearing, Bankruptcy Judge Steven Rhodes heard from city creditors who aren’t represented by lawyers in Detroit’s record $18 billion bankruptcy. Active and retired city workers, as well as investors, would be forced to take less than the $10.4 billion they are owed if Judge Rhodes approves Detroit’s plan. Judge Rhodes is to take their comments into consideration when he holds a trial next month on whether to approve the plan. Remaining opponents include bond insurer Syncora Guarantee Inc., which may have to cover losses imposed on bond investors, with some facing a recovery of as little as 11 percent.