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A Detroit official has dismissed as "lots of wild speculation" a story that Emergency Manager Kevyn Orr is considering the sale of the city's little-known collection of classic cars, Reuters reported on Friday. "There is no proposed plan to sell any asset owned by the city," Bill Nowling, Orr's spokesman, said. That has not stopped heated debate over the prospect that Orr could approve the sale of assets, including works from the Detroit Institute of Arts, to satisfy the city's crushing debt obligations and avoid bankruptcy. Discussion now has shifted to the Detroit Historical Society's 62 classic cars. The collection ranges from a 1905 Cadillac Osceola once owned by Cadillac founder Henry Leland to a 1984 Dodge Caravan and documents the automobile's long history in the city.

Bond insurer National Public Finance Guarantee has hired a new law firm to represent it in the California municipal bankruptcy cases of San Bernardino and Stockton after a judge found its original firm had created a conflict for itself, Reuters reported on Friday. National said on Friday that Weil, Gotshal & Manges will replace Winston & Strawn in the cases. The unusual switch in law firms follows a decision last week by Bankruptcy Judge Meredith Jury in the San Bernardino case to disqualify Winston & Strawn at the behest of the California Public Employees' Retirement System. The pension fund, known as CalPERS, had complained that Winston & Strawn had recently hired attorneys away from K&L Gates, the law firm for CalPERS in both bankruptcy cases. The pension fund also demanded Winston & Strawn's disqualification from the Stockton case. A response to that was due last week but will not be filed with the bankruptcy court hearing the city's case as Winston & Strawn is stepping aside.

An appeals court has put a sewer-system management dispute that arose in the Jefferson County, Ala., bankruptcy case on hold until next year while county leaders pursue a $1.9 billion sewer-debt deal that would settle the matter, Dow Jones Daily Bankruptcy Review reported today. In court papers filed on Wednesday, the U.S. Court of Appeals for the Eleventh Circuit indicated that county leaders won their request to push back a July 24 hearing in the appeals case to early next year, in a key scheduling change that county officials needed as they try to execute the proposed sewer-debt deal.

Detroit Emergency Manager Kevyn Orr ordered an investigation into the city’s employee-benefit programs, including the insurance and pension systems, Bloomberg News reported yesterday. Orr told the city’s inspector and auditor general, agencies that both have subpoena power, to report within 60 days in an order dated yesterday. The document should cover “next steps, and any corrective, prospective, legal, additional investigatory or other action designed to address any waste, abuse, fraud or corruption uncovered,” according to Orr’s order.

New York state lawmakers yesterday announced plans to create a financial restructuring board and binding arbitration process to help struggling municipalities manage their finances, Reuters reported yesterday. The legislation, which will be taken up by the state legislature soon, is designed to shore up fiscally distressed communities with shrinking tax bases and high expenses. "Localities across the state are facing a growing financial crisis of soaring retirement costs while their populations stagnate and property values drop," said New York Governor Andrew Cuomo, announcing the deal with the majority leaders in both houses of the state legislature. "The only options for struggling municipalities cannot be bankruptcy or being subject to a financial control board." The governor did not indicate which cities and towns would likely take part in the new program. The board would be charged with making recommendations on improving fiscal stability, management and the delivery of public services to municipalities that request its help. The board would be able give communities up to $5 million to make the changes.

Jefferson County, Ala.'s plan to emerge from bankruptcy protection hinges in part on the sale of $1.9 billion of new debt this fall to refinance debt tied to its troubled sewer system, but some observers call terms of the new debt onerous, the Wall Street Journal reported today. The proposal for the refinancing, which has been approved by a majority of county commissioners, includes a set of bonds that schedule larger debt payments in the later years of the financing. All told, Jefferson County taxpayers would stand to repay nearly $6.9 billion over the four-decade term of the financing, more than three times the amount the county initially plans to borrow. That is perhaps billions more than they would pay under a plan whose payments would be more evenly distributed, said a potential investor.

A plan to cut pension benefits previously thought sacrosanct for 30,000 workers and retirees may tip Detroit into bankruptcy as Emergency Manager Kevyn Orr negotiates over $17 billion in debt and obligations, Bloomberg News reported yesterday. Getting dispassionate bondholders to take partial payment will be easier than wresting retirement cuts from unions, said Ken Schneider, a Detroit bankruptcy lawyer. He said that Orr’s June 20 meeting with unions and creditors meant to frame the talks may presage the largest U.S. municipal bankruptcy. Orr’s plan will test retirees’ contention that Michigan’s constitution protects vested pension benefits. No such shield exists, the state-appointed manager’s advisers said on June 14 when they unveiled his plan to restructure Michigan’s largest city, a former auto-manufacturing powerhouse that lost one-quarter of its population since 2000.
http://www.bloomberg.com/news/print/2013-06-18/detroit-s-recovery-plan-…

In related news, Fitch Ratings dropped the rating on about $1.5 billion of Detroit bonds to the lowest level of D from C, citing the city's failure to make a June 14 debt service payment, Reuters reported yesterday. The rating downgrade affects taxable pension obligation certificates of participation (COP) Detroit sold in 2005 and 2006, according to Fitch. Detroit's emergency manager on Friday announced the cash-strapped city would stop making payments on its unsecured debt, starting with the pension COPs.
http://www.reuters.com/article/2013/06/17/usa-detroit-fitch-idUSL2N0ET1…

Detroit said on Friday that it would stop making payments on some of its estimated $18.5 billion debt, which would put it in default, and the "insolvent" city called on most of its creditors to accept pennies on the dollar to help it avoid the largest municipal bankruptcy filing in U.S. history, Reuters reported on Friday. In a forceful opening salvo of negotiations with debt holders, Detroit Emergency Manager Kevyn Orr announced a moratorium on some principal and interest payments, including one payment he said was due on Friday. Under his proposal, Orr said unsecured debt holders would be paid less than 10 cents on the dollar, but some creditors would get a bit more based on city revenue. Some $11.5 billion of the debt is unsecured and $7 billion secured, according to figures presented by Orr. Orr said that secured creditors would get better treatment, although how much better was not specified.

Moody's Investors Service yesterday pushed the credit ratings on nearly $8.4 billion of Detroit bonds deeper into the junk category, citing heightened risks the city could file for bankruptcy, undergo a major debt restructuring or do a combination of both, Reuters reported yesterday. The action came a day after Standard & Poor's Ratings Services also downgraded the city's rating and a day before Detroit's emergency manager was set to lay out a restructuring plan for creditors. Kevyn Orr, the bankruptcy attorney Michigan officials tapped in March to run the city as emergency manager, has summoned public labor unions, bondholders, bond insurers and others to a presentation on Friday of "a comprehensive restructuring plan that will require discussion with the various creditor groups of the city," according to a meeting notice. Orr has previously outlined options for dealing with the city's outstanding bonds that call for rescheduling or permanently reducing principal payments, cutting interest rates on the debt, or issuing new debt to provide cash recoveries to creditors.

Michigan’s attorney general says the collection at the Detroit Institute of Arts is not vulnerable to being sold to pay off any of the city’s debt during a municipal bankruptcy, the Associated Press reported yesterday. Bill Schuette said that the artwork “is held by the City of Detroit in charitable trust for the people of Michigan.” Schuette’s opinion follows a request from state Senate Majority Leader Randy Richardville. State-appointed Detroit emergency manager Kevyn Orr has warned DIA officials that creditors could go after valuable pieces if he files for bankruptcy. Orr is trying to wipe out a budget deficit while restructuring more than $14 billion in long-term debt. He is scheduled to meet Friday with creditors. DIA officials have said they don’t believe the collection is in danger of being sold.