Detroit’s public workers didn’t get special treatment in the city’s record municipal bankruptcy, according to Ron Bloom, the investment banker who helped oversee the bailout of the U.S. auto industry.
Testifying today in Detroit federal court, Bloom, 59, denied the claims by debt investors and bond insurers that have attacked Detroit’s debt-cutting plan. Critics say current and retired public workers were unfairly favored over other creditors as the city put together its proposal to cut $7 billion in debt.
Bloom, as chief adviser to a committee of retired city workers, helped negotiate the so-called grand bargain in which wealthy donors and the state of Michigan would give more than $800 million to prop up Detroit’s two pension funds in exchange for protecting city-owned art from liquidation.
Early in the bankruptcy process, “the city had a plan that was not something we thought was remotely fair,” Bloom, now a vice chairman at Lazard Ltd., told U.S. Bankruptcy Judge Steven Rhodes. “We had a pretty vigorous disagreement.”
Rhodes is holding a trial to help decide whether Detroit’s plan is feasible and fair to creditors. A group of hedge funds that hold city pension-related debt and a bond insurer argue the plan is unfair because they are getting much less than the retirees, which they say violates the Bankruptcy Code.
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