Detroit's emergency manager on Friday called for "shared sacrifice" among all the city's creditors and said payments on certain outstanding bonds would stop immediately.
Kevyn Orr proposed that creditors, including bondholders and pension funds, give up some of the $17 billion they are owed by Detroit to help the insolvent city avoid filing what would be the biggest municipal bankruptcy in history.
The moratorium on principal and interest payments on the city's unsecured debt, including a $34 million payment on pension certificates of participation due on Friday, would allow the city to conserve cash needed to provide services to residents, Orr said.
Unsecured creditors, including bondholders and pension funds, will receive a pro rata share of $2 billion of notes the city would issue and pay off as its financial circumstances improve.
City workers and retirees would also face changes to their pensions and health care coverage "consistent with available funding."
An oversight board would be created for Detroit, similar to one created after New York City's financial difficulties in 1979, that would ensure reforms are sustained, Orr said.
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