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
The Role of Representation and Warranty Insurance in M&A Transactions
In today’s mergers and acquisitions market, representation and warranty (R&W) insurance has become a common feature of deal negotiations. Once used primarily in larger transactions, R&W insurance is now frequently incorporated into middle-market deals as buyers and sellers look for efficient ways to allocate risk and close deals. When structured properly, R&W insurance can help […]
Author: George McGowan
You Just Received a Federal Grand Jury Subpoena in New Jersey: Now What?
Receiving a federal grand jury subpoena is not something most businesses or individuals anticipate. While it can be concerning, a federal grand jury subpoena does not necessarily mean that you are being accused of wrongdoing. It does, however, mean that a federal criminal investigation is underway and that federal prosecutors believe you may possess information […]
Author: George McGowan
Why Every Business Should Conduct an Annual Insurance Coverage Review
Most New Jersey business owners purchase insurance policies, file them away, and assume they are protected if a claim arises. Without a regular insurance coverage review, many companies discover gaps only after a lawsuit, cyberattack, property loss, or other significant event occurs. An annual insurance coverage review can help businesses identify potential risks, ensure their […]
Author: George McGowan
Demand Letters & Cease and Desist Letters: When to Send One (and When Not To)
Businesses and individuals often encounter situations where another party breaches a contract, fails to pay a debt, or continues harmful conduct. In many such disputes, a precisely drafted demand letter or cease-and-desist letter serves as a powerful legal tool. It can frequently resolve the dispute and avoid litigation. While demand or cease-and-desist letters can resolve […]
Author: George McGowan
How to Effectively Use Contracts to Manage Risk
Key provisions in your contracts, including those relating to indemnification, insurance, and defense, are essential to contract risk management. While sometimes considered “boilerplate,” these provisions play a pivotal role when determining which party is responsible for certain costs and liabilities. They must always be negotiated and drafted carefully. Indemnification Clauses Businesses should never overlook the […]
Author: George McGowan
Understanding Portability for Estate and Gift Tax
Portability of estate and gift tax enables a surviving spouse to inherit any unused portion of their deceased spouse’s federal estate and gift tax exemption. So, if one spouse doesn’t utilize their full exemption, the surviving spouse can effectively double their exemption amount with regard to estate tax liability. For married couples, portability offers a […]
Author: Marc J. Comer
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.