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Mediation for the last, and potentially one of the biggest, settlements in Detroit's historic bankruptcy case has moved to New York City, a Detroit spokesman said yesterday, amid a newspaper report that a potential deal with Financial Guaranty Insurance Co. (FGIC) is still days away, Reuters reported yesterday. Bond insurer FGIC is the last major objector to the largest-ever municipal bankruptcy, with $1.1 billion on the line from guaranteeing payments on city pension debt. Nearly a month ago, Detroit struck a deal with another bond insurer, Syncora Guarantee Inc., which included a financial recovery of 13.7 cents on the dollar and a bevy of real estate transactions encompassing a central parking garage, development options and a lease for part of a tunnel connecting the city to Canada. The city's lawyers have emphasized at the ongoing hearing that a settlement similar to Syncora's is available to FGIC. Court-ordered mediation on a possible settlement has moved to New York at the request of Judge Gerald Rosen, who is leading mediation efforts in the case, said Bill Nowling, spokesman for Detroit emergency manager Kevyn Orr, who is participating by telephone. Nowling added that the situation remains fluid and no deal has been reached.

Detroit has recruited top municipal and corporate executives from New York to Kentucky to run the city once it leaves bankruptcy, Mayor Mike Duggan testified as the final witness in favor of a plan to cut $7 billion in liabilities, Bloomberg News reported yesterday. The mayor described the city’s progress rebuilding services including streetlights and buses, as well as police and fire protection. One focus has been on persuading residents to begin repairing their own blighted neighborhoods. Duggan cited lessons he learned restructuring Wayne County, Mich., where he was a top executive, and as head of the Detroit Medical Center. The mayor said that he’s skeptical about the wisdom of borrowing another $50 million as city Emergency Manager Kevyn Orr proposed, which would bring its bankruptcy exit loan to $325 million. The city has the authority to borrow the extra money but isn’t required to.

Kevyn Orr, Detroit's state-appointed emergency manager, defended a decision to keep valuable art off the auction block, telling a judge on Friday that it would greatly harm a city museum and cause turmoil in the community, especially among powerful, wealthy patrons, the Associated Press reported on Friday. "A one-time sale is detrimental to the long-term benefit of the city," Orr said. "Selling any art would cause a maelstrom." The Detroit Institute of Arts holds many pieces that were acquired by the city. But no art will be sold in a deal that protects the museum and raises hundreds of millions of dollars from the state, foundations and philanthropists, solely for city pensioners whose benefits would be cut in bankruptcy.

Moody’s Investors Service said that Harrisburg, Pa., faces “significant fiscal distress” and possible default on a bond guaranty even after it sold and leased assets to clear a debt burden on an incinerator project, Bloomberg News reported yesterday. The state capital guaranteed a 1998 capital-appreciation bond sale by the city’s Redevelopment Authority, Dan Seymour and Geordie Thompson, Moody’s analysts in New York, wrote in a report released yesterday. Rental income from a downtown office building was supposed to back bond payments when they begin in 2016. That revenue won’t be enough, even though Pennsylvania officials last month signed a lease to place 900 state workers at the site, according to Moody’s. Harrisburg this year exited a state receivership brought on by a fiscal crisis stemming from an overhaul and expansion of an incinerator that didn’t generate enough revenue. In December, the community of about 50,000 cleared its debt load of $362.5 million by selling and leasing assets and winning concessions from creditors.

The judge presiding over the Stockton, Calif., bankruptcy case said yesterday that he will wait until late October to make a final ruling over whether the city can exit bankruptcy, Reuters reported today. Bankruptcy Judge Christopher Klein said that he was "not in a position to make a decision right now." Earlier in the day, Judge Klein surprised the courtroom by ruling that the city's contract with the California Public Employees' Retirement System, the world's largest pension fund, could be rejected. That ruling follows a similar determination in the city of Detroit's bankruptcy case, in which that judge decided that pensions could also be made to absorb losses along with other creditors. In that case, the city's pension plans have agreed to accept benefit reductions, but the Detroit bankruptcy is not yet resolved. CalPERS disagreed with the judge's decision. "This ruling is not legally binding on any of the parties in the Stockton case or as precedent in any other bankruptcy proceeding and is unnecessary to the decision on confirmation of the City of Stockton's plan of adjustment," CalPERS spokeswoman Rosanna Westmoreland said.

A federal judge has ruled that a group of sewer customers can continue their appeal of Jefferson County's bankruptcy exit plan and says that she legally could scrap the schedule for future sewer rate increases called for under that plan, the Birmingham (Ala.) News reported today. U.S. District Court Judge Sharon Blackburn issued an order on Tuesday regarding a request by Jefferson County officials to dismiss most of the claims in the lawsuit that challenge the county's bankruptcy exit plan. A bankruptcy judge had confirmed the plan, allowing the county to exit its $4.23 billion bankruptcy last year. Jefferson County officials had argued that since the plan has already been executed, with refinance of its debt with new bond holders, the plan can't be reversed. Blackburn disagreed. "The fact that the (bankruptcy) Confirmation Order has taken effect — the new sewer warrants have issued and the old sewer warrants have been retired — does not extinguish the controversy, although it may limit the scope of relief available" to sewer customers, she wrote. Blackburn's order does not change anything about the exit plan, just allowing the appeal to go forward before her. The judge in her order, however, agrees there may be some parts of the bankruptcy judge's confirmation order approving the plan that may be impossible to reverse. But the plan for the future sewer rate increases isn't one of them, she states.

Kevyn Orr, the emergency manager shepherding Detroit through its record municipal bankruptcy, told a judge about the tough situation Michigan’s biggest city faced when he was asked to help get its house back in order, Bloomberg News reported yesterday. Core services were “substandard” and finances were in “dire straits,” Orr, testified yesterday in Detroit federal court, where a bankruptcy judge is weighing whether the city’s plan to eliminate $7 billion in debt is feasible and fair. Orr was given sweeping authority over Detroit’s finances and government in 2013, when Governor Rick Snyder appointed him to help the city reduce $18 billion in debt. Previously, Orr was a partner at the Jones Day law firm, which is now helping Detroit through the debt-adjustment process. Union lawyers initially attacked Orr’s decision to put Detroit into chapter 9 bankruptcy in July 2013. They accused him and Jones Day of conspiring with Snyder to drive the city into a filing without considering alternatives. Since then, mediation has produced agreements with most major creditor groups. Orr said he was “amazed that we reached some of the settlements we did” and that most wouldn’t have happened without mediation, which was led by Gerald Rosen, the chief federal judge in Detroit.

A Detroit consultant said yesterday that the city should be able to access capital markets and borrow at a rate of around 5 percent after it exits bankruptcy, as long as its tax revenue remains stable, Reuters reported yesterday. But even as Kenneth Buckfire, president of restructuring firm Miller Buckfire & Co., testified about the factors that will help Detroit woo investors, he said that the city will have to educate the municipal bond market about the "New Detroit," once it exits the largest-ever municipal bankruptcy. Buckfire, in testimony in U.S. Bankruptcy Court, said that the markets will respond well to Detroit's paring of its liabilities from $10 billion to $3 billion, 10-year cost certainties, and post-bankruptcy oversight. Bankruptcy Judge Steven Rhodes is currently conducting a hearing to determine the fairness and feasibility of Detroit's bankruptcy plan, part of which includes a $325 million exit facility financed through Barclays.
http://www.reuters.com/article/2014/09/30/usa-detroit-bankruptcy-borrow…

In related news, Detroit lost more than 1 million residents and three-quarters of its retail businesses on its way to bankruptcy, and now Comcast Corp. also wants leave, Bloomberg News reported today. The largest U.S. cable-television company says it will shed 2.5 million customers in Detroit and other Midwestern and Southern communities as part of a plan to buy No. 2 Time Warner Cable Inc. Relinquishing the markets will help keep Comcast’s market share below 30 percent of U.S. pay-TV homes — a level that regulators once set as a limit and Comcast has volunteered to honor. As it drops Detroit, Comcast would gain the nation’s top two markets, New York and Los Angeles. The $45.2 billion acquisition would enlarge Comcast by 7 million video customers. The castaways in Detroit, Minneapolis and elsewhere would belong to a new company, GreatLand Connections Inc., to be created in what the companies call a tax-efficient spinoff. The new company’s debt would exceed industry averages — something that has raised concerns about service in those communities.
http://www.bloomberg.com/news/print/2014-10-01/comcast-to-follow-1-mill…

Bankruptcy Judge Steven Rhodes ruled yesterday that Detroit can continue shutting off water service to non-paying customers, saying his court does not have jurisdiction over the issue and that suspending disconnections for six months could hurt the city's finances, Reuters reported yesterday. "Detroit cannot afford any revenue slippages," Judge Rhodes said, before resuming his ongoing hearing on Detroit's plan to exit municipal bankruptcy. Detroit's bankruptcy plan includes a $4.5 million water affordability fund and a cap on rate increases. It also creates a regional water authority, which Judge Rhodes said could be put in jeopardy by a revenue drop from unpaid bills. Residents and political activists had asked Judge Rhodes for a six-month restraining order against the shutoffs. Last week, during a break in the bankruptcy hearing, Judge Rhodes heard arguments about the financial and social impacts of cutting off the water of hundreds of homes each day.

A Michigan state panel on Friday approved four bond deals worth up to $1.1 billion which are needed for the city of Detroit to emerge from bankruptcy, plus the sale of city-owned land parcels needed for a new public bridge to Canada, the Lansing State Journal reported on Saturday. The Detroit City Council had previously approved the bond deals, which will be used to pay off various creditors who have agreed to the city’s latest plan of adjustment in bankruptcy, provide bankruptcy exit financing, and set aside money for creditors’ claims that are still disputed. The City Council had proposed an alternate plan for the $1.4-million sale to the Land Bank Fast Track Authority of 301 city-owned properties near the site of the proposed New International Trade Crossing. But the City Council essentially withdrew that alternative proposal on Thursday, conceding in a letter from Detroit Corporation Counsel Melvin “Butch” Hollowell that their plan was not currently viable. Although the Michigan Local Emergency Financial Assistance Loan Board — which consists of three state officials appointed by the governor — must approve the bond deals, it is the city, not the state, which is on the hook for paying off the bonds.