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Detroit’s debt-cutting plan can be challenged by nearby suburban counties when a trial over the feasibility of the proposal starts later this month, a judge ruled, increasing the opposition the city must overcome to end its $18 billion bankruptcy, Bloomberg News reported yesterday. Macomb, Wayne and Oakland counties oppose various aspects of the city’s plan, mainly because the proposal would take money out of the Detroit water system to help bolster an underfunded pension fund for city workers. The counties say the transfer may increase utility bills for their residents, who rely on the city for water service.

In related news, Detroit's largest union said on Monday that the city's historic bankruptcy proceedings have given the management of the water and sewer department opportunities to disrupt bargaining units and strip union members of job protections, Reuters reported yesterday. The American Federation of State, County and Municipal Employees Michigan Council 25 filed a motion on Monday to clarify or lift an automatic court stay on litigation against Detroit during the bankruptcy process. The state's employment commission, which settles labor disputes, has decided against holding hearings regarding the city until after the bankruptcy process is concluded. But AFSCME is pressing for the commission to hear two complaints that it filed against the Detroit Water and Sewerage Department sooner than that. The union contends that the stay applies only to those seeking monetary judgments. Read more.

The city’s water department approved a plan to refinance almost $5.2 billion in debt, a move that could free up cash for Detroit’s restructuring and potentially speed an exit from bankruptcy court, the Detroit News reported today. The plan, approved by Detroit Water and Sewerage commissioners, would lower the utility’s interest rate, slash costs and potentially save customers across the region millions of dollars. The amount of savings for the city depends on how many bondholders accept the offer but the maximum savings would be significantly less than $500 million. The plan involves offering bondholders a chance to have the city buy back the bonds. By doing so, the utility would refinance up to $5.183 billion of debt.
http://www.detroitnews.com/article/20140806/METRO01/308060114/Detroit-a…

In related news, the tab for the first nine months of Detroit's historic bankruptcy case is at least $51.19 million, according to a report on fees and expenses charged by the city's team of lawyers and consultants from July 2013 through March 2014, Reuters reported yesterday. There were no March fees and expenses listed for Jones Day, indicating that the law firm's eventual charges will exceed the report's $17.35 million. Meanwhile, the report only included fees and expenses from accountants Ernst & Young for January through March of this year, $3.69 million. The firm has revised and redacted monthly invoices for July through December 2013, and the fee examiner will file supplements on those numbers in coming days, according to the report. Additionally, the fee examiner keeping tabs on the bills of professionals working on Detroit's municipal bankruptcy questioned more than $67,000 worth of charges submitted by Dentons for media activities, such as reviewing newspaper coverage and compiling press reports, during the first three months of this year, the American Lawyer reported today.
http://www.reuters.com/article/2014/08/06/usa-detroit-fees-idUSL2N0QC14…

Fitch Ratings said yesterday that allowing Puerto Rico’s public corporations to file for chapter 9 protection would benefit holders of the agencies’ debt as well as the commonwealth, Bloomberg News reported yesterday. Pedro Pierluisi, a Democrat who represents Puerto Rico in the U.S. House, introduced a measure in July that would let the island’s agencies restructure debt in court. U.S. states and territories are currently not able to file for chapter 9 protection under the Bankruptcy Code. Puerto and its corporations have a combined debt burden of $73 billion. Lacking a bankruptcy option, Puerto Rico approved a law in June that would allow some public corporations to negotiate with bondholders, potentially forcing them to accept unfavorable terms. Fitch cut the commonwealth’s rating deeper into speculative grade after the legislation passed, and its bonds declined. Giving the chapter 9 option would allow investors to better assess potential losses, Fitch said.

The levee district protecting a massive St. Peters, Mo., business park in the Mississippi River flood plain has filed for chapter 9 bankruptcy protection, the St. Louis Post-Dispatch reported today. The levee district has been unable to find a replacement for one of the project's two primary developers — Lakeside 370 LLC, a firm related to Gundaker Commercial Group. Lakeside 370 LLC withdrew from the project in 2012 amid lingering effects of the 2008 recession. The levee district has failed since last fall to make all regular interest payments due the owners of $33.9 million in bonds sold to buy the four-mile levee built by the city and to maintain it, and its bonds are in default.

Detroit Mayor Mike Duggan said that residents with unpaid water bills now have 21 more days to pay or set up a payment plan as the city reassesses its policy on how to deal with a $90 million backlog in unpaid bills, Reuters reported yesterday. The bankrupt city attracted unwanted international attention earlier this summer when it accelerated water shutoffs, turning off water to 7,210 accounts in June as it struggles to return to financial health. About 90,000 residential and business water accounts are still delinquent in the Detroit area, most of them in the city of 689,000 people, others in surrounding areas. The controversy made its way into the city's ongoing bankruptcy proceedings last month when Judge Steven Rhodes, who is presiding over the city's plan to exit chapter 9 bankruptcy, criticized the city, saying that the mass shutoffs were bringing "bad publicity for the city it doesn't need." In response, emergency manager Kevyn Orr handed control of Detroit's Water and Sewerage Department to Mayor Mike Duggan who promised a more streamlined, and fair, response to those with delinquent bills.

A federal court agreed on Friday to suspend seven cases seeking to overturn a lower court ruling that found Detroit was eligible for municipal bankruptcy, Reuters reported on Friday. The Sixth Circuit U.S. Court of Appeals' action followed motions filed on Thursday by attorneys for Detroit pension funds, unions and others requesting that the cases be suspended instead of dismissed until the city concludes a confirmation process for its bankruptcy exit plan. The appeals court had initially scheduled oral arguments for July 30 for the seven cases. But those proceedings were eventually canceled at the request of the city and the appealing parties due to actual or pending settlements. Instead of dismissals, the parties asked the court to hold off on ruling on any issues in the cases, adding however that the appeals process could be resumed if Detroit's current plan to adjust $18 billion of debt is changed or fails to be confirmed. Hon. Steven W. Rhodes has set an Aug. 21 start date for the confirmation hearing, which will determine whether the plan is fair and feasible.

Lenders to Puerto Rico’s electric power authority are giving the beleaguered utility another two weeks before it has to make past-due payments on its lines of credit, the New York Times DealBook blog reported yesterday. The Puerto Rico Electric Power Authority, which is known by its acronym Prepa, said it was engaged in “productive discussions” with its bondholders, bond insurers and the banks that provide the short-term bank lines. Prepa owes money on two main credit lines — a roughly $250 million line from Citigroup and a $550 million line from a syndicate of banks. If Citigroup and the other lenders force Prepa to pay immediately, it could trigger the authority’s restructuring and increase the likelihood of losses for the banks. The agreement allows Prepa to delay until Aug. 14 certain payments that were due last month, the authority said, but it’s unclear over the long term how the utility will be able to come up with the money that it owes.

A federal court was asked yesterday to suspend seven pending appeals over Detroit's eligibility for bankruptcy until the city concludes a confirmation process for its plan to adjust $18 billion of debt, Reuters reported yesterday. Attorneys for the city, Michigan, Detroit pension funds, unions and others that filed five of the appeals said that moving forward with the cases now would "significantly undermine" settlements and mediation and could delay the city's exit from the biggest municipal bankruptcy in U.S. history. But they also declined to dismiss their cases at this point. "Holding the appeals in abeyance also ensures that this court will not unnecessarily decide important state and federal constitutional issues," the attorneys said in a letter to the U.S. Court of Appeals for the Sixth Circuit. They added that the federal appeals court would retain jurisdiction after the plan confirmation process to review a December ruling by Bankruptcy Judge Steven Rhodes that found Detroit was broke and eligible for chapter 9 municipal bankruptcy.

Puerto Rico’s government-owned corporations could file for bankruptcy protection under a bill proposed in the U.S. House of Representatives by the delegate from the Caribbean territory, which is struggling to pay $73 billion in debt, Bloomberg News reported yesterday. Pedro Pierluisi (D), who can propose legislation but can’t vote on it, yesterday introduced the measure that would let agencies restructure debt in court. They don’t have that option, unlike cities including Detroit and Stockton, Calif., that have done so to escape financial burdens they could no longer afford. The bill would “enable the Puerto Rico government to authorize its government-owned corporations to utilize the tried-and-true chapter 9 procedure if it becomes necessary, under the expert supervision of an impartial federal bankruptcy judge,” Pierluisi said in a statement. Puerto Rico’s credit rating was cut to junk this year, prompting speculation among investors about bond defaults. The island of 3.6 million people and its agencies, including its electric company, have borrowed to pay bills as the economy shrank and residents left for the U.S. mainland. Its debt is tax free in all states and is held in 66 percent of U.S. municipal-bond mutual funds.

The U.S. Court of Appeals for the Sixth Circuit yesterday had some criticism for a bond insurer’s bid to block Detroit from accessing casino revenue, with one judge calling the creditor’s efforts “fairly Draconian,” the Detroit News reported today. The panel was considering an appeal from Syncora Guarantee Inc., a holdout creditor in the city’s bankruptcy case that is fighting lower court rulings that $15 million a month in casino revenue belongs to bankrupt Detroit. Judge Julia Smith Gibbons gave no timeline for a decision but said the three-judge panel would consider the arguments “carefully.” The appeal by Syncora could determine whether Detroit can keep the casino cash — labeled by the city its best revenue stream — and spend it on public safety services and paying other creditors, including workers. The hour-long hearing in the Sixth Circuit Appeals Court ended with no resolution for Detroit or Syncora. Syncora was in court appealing orders from Detroit’s bankruptcy judge and a U.S. District Court judge that casino revenue belongs to the city while it is in bankruptcy court.