Judge Delays Detroit’s Bankruptcy Trial

by San Antonio Attorney

A hearing on Detroit’s bankruptcy plan to restructure $18 billion of debt and get out of bankruptcy will be delayed for one week.

According to U.S. Bankruptcy Judge Steven Rhodes, he understands that Syncora Guarantee Inc. needs a little extra time before the trial, but rejected the bond insurer’s request to schedule the hearing on Sept. 29.

Syncora is insuring Detroit’s liabilities and it stands to lose $400 in the bankruptcy case. The company said that a 45-delay was necessary since complete documentation of the city’s settlements with certain creditors was inadequate. Syncora claimed that without the documents their time to prepare for the trial was not enough.

The bond insurer also stated on Monday’s court filing that Detroit had just made some major modifications in its plan that could have a substantially undesired harmful effect on the company’s capability to recover after the case.

The latest modification in Detroit’s plan excludes any settlement higher than $1.4 billion on COP or certificates of participation purchased from 2005 to 2006 to increase capital for the city’s retirement programs. Financial Guaranty Insurance Co and Syncora are liable for settling the debt, which they covered with insurance. They pose the greatest resistance on Detroit’s bankruptcy plan.

Detroit has requested the court to nullify the pension debt. The most recent version of the city’s plan establishes a litigation trust that will compensate some creditors with greater recoveries if the debt be nullified.

Rhodes’ timetable still considers a trial that may stretch out until Sept. 23, exactly the same end date he stated in a prior order that had the hearing beginning on Aug. 14. A week ago, the judge proposed that the 98 hours each he designated to the plan’s proponents and oppositions could be reduced given the latest agreements between the city and its creditors.

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