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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.

Bankruptcy Judge Thomas Bennett pushed back what could be the final major hearing for Jefferson County, Ala.'s, bankruptcy case after county leaders squeezed another $300 million in breaks from sewer bondholders, salvaging the deal that's meant to get the county out of chapter 9 by the end of the year, Dow Jones Daily Bankruptcy Review reported today. With his court order signed on Thursday, Judge Bennett rescheduled the county's confirmation hearing for Nov. 20, giving county leaders more time to finalize a fresh debt repayment deal that gave them even bigger breaks on the $3.1 billion the county borrowed to fix its aging sewer system.

Alabama's bankrupt Jefferson County on Thursday approved a reworked settlement plan for its landmark $4.2 billion municipal bankruptcy that increases already stiff losses for Wall Street creditors by $300 million, Reuters reported yesterday. With a 4-to-1 vote, the county commission kept Alabama's most populous county on track for a targeted 2013 end of its nearly 2-year-old bankruptcy case. The revised terms mean JPMorgan, hedge funds and creditors will recover around 53 cents on the dollar, as opposed to about 60 cents under the previously agreed terms. It also cuts the size of a bond sale the county must hold to complete its exit from bankruptcy.

Alabama's Jefferson County officials said that the county and Wall Street creditors have reached agreement on a revised plan to end the second-largest U.S. municipal bankruptcy, Reuters reported yesterday. The new terms were not made public but county officials had said they needed $350 million more in concessions because interest rates had risen since June, when JPMorgan, hedge funds and other creditors reached a tentative settlement to end the $4.2 billion bankruptcy. County commissioners will consider the revised plan today, when details will be released, county officials said in a statement.

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.

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.

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.

Detroit Emergency Manager Kevyn Orr did not speak about filing for Chapter 9 municipal bankruptcy in his first meetings with Michigan state officials before he was named to his post, according to testimony he delivered on the third day of the city's bankruptcy eligibility trial, Reuters reported on Friday. Orr's testimony came in the last 50 minutes of Friday's session, which offered only a brief glimpse of what may be the most critical testimony as Detroit seeks to establish a case that it is bankrupt and has a right to work out its stark financial problems under protection of a bankruptcy court. Orr said that he first met with Gov. Rick Snyder's staff on Jan. 29 when representing his former law firm, Jones Day, as part of a team pitching to advise the state on how to restructure Detroit.

Detroit was operating on a "razor's edge" and had no options to avoid running out of cash and filing for bankruptcy, the city's top advisor testified yesterday in a trial to determine whether the city is eligible to file the largest municipal bankruptcy in U.S. history, Reuters reported yesterday. Kenneth Buckfire, the city's top outside financial advisor, said that the city tried to avoid filing for bankruptcy in July by cutting expenses and looking at city assets that might be sold to raise cash. Buckfire, an investment banker hired by the city in January to advise on its financial restructuring, described in his testimony the city's search for cash in the weeks before the state-appointed emergency manager, Kevyn Orr, determined that a bankruptcy filing was Detroit's best option. Detroit's best source of revenue was its three casinos, which brought in about $180 million a year, or 20 percent of the city's budget, Buckfire testified. But those funds have been locked up since they were pledged as collateral to interest-rate swap contracts agreed to in 2009; the city now hopes to use them as collateral on $350 million of debtor in possession financing to end the unfavorable swap deals. Buckfire's testimony was part of Detroit's efforts to convince Bankruptcy Judge Steven Rhodes that Detroit meets the legal requirements of municipal bankruptcy. The city expects to wrap up its case today. Rhodes is not expected to make a ruling on eligibility until at least mid-November.

The largest U.S. public employee pension fund filed an appeal yesterday of a judge's August ruling that the city of San Bernardino, California, is eligible for bankruptcy protection, Reuters reported yesterday. The California Public Employees' Retirement System (CalPERS), which manages $277 billion of assets, has fiercely opposed San Bernardino's quest for chapter 9 protection, because the city suspended its $1.2 million bimonthly payments to the fund for a year after it declared bankruptcy in August 2012. That move was unprecedented. No California city has ever stopped paying CalPERS, and the fund — which administers benefits for over 3,000 city, state and local employers — is worried that such behavior could encourage other cash-strapped cities to follow suit, said Karol Denniston, a bankruptcy attorney in San Francisco.