Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Detroit Emergency Manager Halts Debt Payments, Urges Creditors To Accept Pennies on the Dollar
Author: Joel R. Glucksman
Date: June 28, 2013
Key Contacts
Back
Detroit’s appointed emergency manager Kevyn Orr painted a grim picture of the city’s finances in his recent meeting with creditors and investors. Orr, who is tasked with implementing a plan that may help the city avoid falling into bankruptcy law protection, asked creditors and union leaders to accept significantly lesser amounts than what they are owed during the closed-door negotiations.
Orr noted that budget cuts alone will not be sufficient to prevent bankruptcy proceedings, and instead laid out a proposal under which creditors and unions would receive less than 10 cents on the dollar on portions of Detroit’s debt, including unsecured bonds and a percentage of unfunded pension liabilities, the New York Times Reports. These liabilities currently amount to more than $11 billion. Orr is also expected to address additional cutbacks in his upcoming meeting with labor leaders, which will include scaling back health care benefits for retired city workers.
“This is not meant to be a hostile act,” Orr said at a news conference, the Times reports. “It isn’t meant to be combative. It is meant to be an acknowledgment and recognition of the realities that we can no longer deal with.”
In addition to negotiating with creditors and unions, Orr also announced that Detroit will cease making principal and interest payments on a portion of its unsecured bond debt, including a $34 million payment on pension certificates of participation, Reuters reports. Orr said that stopping these debt payments is essential to enabling the city to continue providing public services to Detroit residents.
It is unclear whether the city will be able to avoid filing what would be the largest municipal bankruptcy in the nation’s history, and Orr has called upon creditors and unions to make “shared sacrifices” to prevent this scenario. However, rating agency Moody’s does not have high hopes for city, and recently downgraded several of Detroit’s debt obligations.
“We also believe the city’s risk of bankruptcy has increased over the last six months,” said Moody’s, according to the Times. “All of Detroit’s ratings remain under review for possible downgrade as we analyze the ongoing discussion between the city and its creditors and stakeholders.”
- Practices: Bankruptcy & Creditors' Rights, Corporate Transactions & Business
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
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
Why Secured Transactions Are Important
Secured transactions form the backbone of a wide range of business dealings, including business loans, mortgages, and inventory financing. Because the stakes are often high and relatively minor oversights can have drastic consequences, lenders and borrowers should thoroughly understand how to form an enforceable security agreement that protects their legal rights. What Is a Secured […]
Author: Dan Brecher
Don’t Cash a “Paid in Full” Check Without Understanding the Legal Implications
Cashing a check marked “paid in full” can be a risky endeavor, particularly if you don’t fully understanding the legal implications. If you are owed more than the amount of the check you accept and deposit, you may waive your right to collect the full disputed amount. That is why you should consider either rejecting […]
Author: Dan Brecher
Changes to Qualified Small Business Stock Will Benefit Startup Founders and Investors
The One Big Beautiful Bill Act of 2025 (OBBBA) significantly impacts federal taxes, credits, and deductions. A key change relating to Qualified Small Business Stock (QSBS) allows greater tax-free gains for investments in startups and other qualifying small businesses. Company founders and other investors should understand how the enhanced tax strategy works or risk missing […]
Author: Dan Brecher
Corporate Consolidation and Antitrust Issues in Mergers
Corporate consolidation involves two or more businesses merging to become a single larger entity. The result is often a stronger and more competitive company that can better navigate today’s competitive marketplace. What Is Corporate Consolidation? Corporate consolidation closely resembles a basic merger transaction. The primary difference is that a consolidation creates an entirely new business […]
Author: Dan Brecher
What is Business Law and Why Is it Important?
Business law plays a critical role in nearly every aspect of running a successful enterprise, from negotiating a commercial lease to drafting employee policies to fulfilling corporate disclosure obligations. Understanding what is business law and your legal obligations can help your business run smoothly and build productive relationships with clients, business partners, regulators, and others. […]
Author: Dan Brecher
Corporate Transactions: Best Practices for Successful Deals
Corporate transactions can have significant implications for a corporation and its stakeholders. For deals to be successful, companies must act strategically to maximize value and minimize risk. It is also important to fully understand the legal and financial ramifications of corporate transactions, both in the near and long term. Understanding Corporate Transactions The term “corporate […]
Author: Dan Brecher
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.