Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Bond insurer creates setback for Detroit bankruptcy plan
Author: Joel R. Glucksman
Date: April 4, 2014
Key Contacts
Back
Detroit is continuing to negotiate with its creditors in order to form a plan to emerge from Chapter 9 bankruptcy. In the latest wrinkle, bond insurer the Financial Guaranty Insurance Company, argued in a lawsuit that Detroit’s plan would illegally discriminate against the city’s third largest group of creditors, according to The New York Times. This group consists of the investors who gave the city $1.4 billion for workers’ pensions almost 10 years ago.
These investors bought “certificates of participation,” which the city argues constituted an effort on behalf of Detroit’s former leadership to avoid the limit on how much debt it could take on, according to the news source. Detroit is calling the investment a “sham transaction,” and plans to give investors an extremely low recovery rate in its bankruptcy plan. When it issued its plan of adjustment, the city considered the debt to be null and void, but in order to bring about a faster settlement, it is willing to honor 40 percent of the certificate holders’ claims if they will vote in favor of the plan of adjustment.
“The city’s opportunism and revisionist history have broad repercussions, not the least of which being the impact on the funded status of the city’s retirement systems,” Financial Guaranty said in its suit.
Meanwhile, pension holders are pursuing a different strategy. Under Emergency Manager Kevin Orr’s plan of adjustment for Detroit, fire and police pensioners will take a 10 percent cut and normal pensioners will take a 30 percent cut against what they are owed, according to MLive. Many of these pensioners feel that the plan is unfair, and dozens of handwritten letters have begun appearing in the federal bankruptcy court database.
“We worked very hard and too many years to deserve a slap in the face like this,” wrote retiree Angela Newell.
The basic tenet of any successful bankruptcy plan is that the financial pain has to be shared by all of the parties. It remains to be seen if the participants in Detroit’s bankruptcy will buy into this understanding.
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
New Jersey’s Revised UHAC Regulations: What Residential Developers Need to Know About Affordable Housing Commitments
New Jersey residential developers with affordable housing obligations should carefully review their existing approvals, development agreements, and proposed deed restrictions in light of the State’s revised UHAC regulations (Uniform Housing Affordability Controls). The regulations, which took effect on November 6, 2025, significantly change the administration and physical requirements for affordable housing units. For developers with […]
Author: Wendy Rubinstein Quiroga
“No Comment” Culture: Why Silence Is Often the Riskiest Legal Strategy
A “no comment” response is sometimes the right call when a legal problem arises. As a blanket policy, however, it lets allegations go unanswered, deadlines pass, evidence disappear, and manageable disputes grow into expensive litigation. The businesses that fare best are usually the ones that say little publicly while acting decisively behind the scenes. When […]
Author: Sean M. Pena
Utility-Scale Battery Storage Projects: A Legal Roadmap for Developers, Property Owners and Other Stakeholders
Utility-scale battery energy storage systems (BESS) are becoming an increasingly important component of the electric grid throughout New Jersey, New York, and Pennsylvania. As renewable generation expands, electricity demand increases and grid operators seek greater flexibility, battery storage can help balance supply and demand while providing additional capacity and reliability. For developers, battery storage presents […]
Author: Nicholas Wall
Navigating Disputes: Hire a Partnership Dispute Lawyer
A falling out between partners can be disastrous for any business. In many cases, the partnership will not survive. If you are in an unworkable situation with your partners, it may be time to consult a partnership dispute lawyer experienced in handling partnership breakups and dissolutions before the situation deteriorates any further. It is easy […]
Author: Jay McDaniel
Section 363 Sales in Bankruptcy: What Businesses, Lenders, and Buyers Need to Know
When a company enters Chapter 11 bankruptcy, many assume the process will culminate in a lengthy reorganization plan. However, distressed businesses are increasingly being sold through a different mechanism — a sale under Section 363 of the United States Bankruptcy Code. A Section 363 sale allows a company, as a debtor-in-possession in bankruptcy, to sell […]
Author: John D. Giampolo
Zoning Laws Explained: What You Need to Know Before Buying Property
Before buying property, it is critical to determine whether local zoning laws may affect your plans. If you plan to redevelop the property, you will want to confirm that local zoning regulations permit development as intended. If acquiring property that is already developed, you must verify that the use is permitted in the underlying zoning […]
Author: Wendy Rubinstein Quiroga
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.