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
BESS Project Agreements: Allocating Risk Among Developers, EPC Contractors, and Equipment Suppliers
Developers, engineering, procurement, and construction (EPC) contractors, and equipment suppliers each play a critical role in completing a BESS project. However, when equipment costs rise, deliveries are delayed, or regulations change, determining who bears the financial consequences can become contentious. Well-drafted project agreements are essential to sound risk allocation. Key Takeaways This article is Part […]
Author: Nicholas Wall
IP Infringement: What Steps Can You Take If You're Affected?
IP infringement occurs when someone uses your intellectual property without your permission or beyond the scope of the permission you granted. Common examples of IP infringement include copying a product’s patented features or using a trademarked logo in a way that is likely to confuse consumers about the source or affiliation of goods or services. […]
Author: Michael Mietlicki
Public Allegations, Unfinished Investigation: What New Jersey Businesses Should Do Next
When facing public allegations of wrongdoing, companies should not let the speed of the public conversation dictate the speed of an investigation. An investigation designed to confirm a preferred narrative rather than establish the facts can create serious problems later, particularly if litigation, regulatory scrutiny, or employment claims follow. Key Takeaways When public allegations surface […]
Author: Sean M. Pena
BESS Interconnection: Managing Grid, Cost, and Schedule Risk
For battery energy storage system (BESS) developers, securing equipment and site control is only part of the development equation. A project must also connect to the electric grid, and increasingly, BESS interconnection is one of the biggest sources of schedule, cost, and contractual risk. Key Takeaways This article is Part 3 of our Battery Storage […]
Author: Nicholas Wall
Navigating Director and Officer Liability in Times of Financial Distress
Director and officer liability increases sharply when a company is in financial distress. Decisions that would draw little attention in a healthy business can later be challenged by creditors, shareholders, bankruptcy trustees, and regulators as breaches of fiduciary duty, fraudulent transfers, or oversight failures. Understanding where that exposure comes from, and how to manage it, […]
Author: Michael Mietlicki
Before You Buy: Managing Real Estate and Permitting Risk for BESS Projects in New York and New Jersey
For developers pursuing battery energy storage system (BESS) projects, finding the right property is only the beginning. BESS site selection is as much a legal and transactional exercise as a real estate decision, with risk analysis central to the project’s ultimate success. Key Takeaways The core questions for BESS site selection in New York and […]
Author: Nicholas Wall
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.