Tags: Detroit | bankruptcy | creditors | pensions

Detroit Files Last Version of Debt-Cutting Plan Before Vote

Monday, 05 May 2014 03:19 PM

Detroit filed the final version of its debt-adjustment plan before creditors begin voting on the proposal to reduce employee pensions and cut bond debt.

The city included details of the deals it has reached in recent weeks with current and retired public workers. The plan is built around an $816 million offer from state officials and private foundations to help shore up two underfunded retirement systems in exchange for a promise that the city’s collection of rare art, housed at the Detroit Institute of Arts, won’t be sold.

On May 12, the city will begin mailing out a disclosure statement, along with a letter to public employees, explaining the plan and how it could affect creditors. Creditors, including current and retired workers, have until July 11 to turn in their ballots. The city will file the results with the bankruptcy court July 21.

If enough city workers and retirees support the plan, police and firefighters would receive all of their normal monthly retirement payments, while general employees would see their monthly payments reduced by 4.5 percent. A previous version of the plan proposed cuts of 6 percent and 26 percent, respectively.

To lock in the $816 million, a majority of those voting in each employee group must approve the city’s plan, and that majority must hold two-thirds of the claims of those voting.

Plan Approval

U.S. Bankruptcy Judge Steven Rhodes will take the voting into account when he decides whether to approve the plan. Under the U.S. Bankruptcy Code, as long as at least one group of creditors votes in favor of the plan, Rhodes can approve it, even over the objections of the others.

Michigan’s largest city filed for bankruptcy in July saying it couldn’t meet financial obligations and provide adequate services. Since then, it’s been negotiating with creditors including public pension systems and unions.

Opponents of the bankruptcy plan include bond insurers, some bondholders and some Detroit suburbs that are customers of the city’s water and sewage department.

Rhodes has said in court that he expects the city and those creditors still opposed to the plan to keep negotiating, even after they start a hearing in July over whether the proposal should be approved.

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Detroit filed the final version of its debt-adjustment plan before creditors begin voting on the proposal to reduce employee pensions and cut bond debt.
Detroit, bankruptcy, creditors, pensions
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2014-19-05
Monday, 05 May 2014 03:19 PM
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