DETROIT, March 31, 2014 /PRNewswire/ -- The City of Detroit (the "City") today filed an amended plan of adjustment (the "Plan") and a related disclosure statement (the "Disclosure Statement") with the U.S. Bankruptcy Court for the Eastern District of Michigan. The filing offers additional details about the:
- Proposed $816 million settlement to help fund public employee pensions and preserve the collection of the Detroit Institute of Arts for the benefit of the public.
- Settlement with the counterparties to the swaps related to the City's pension certificates of participation.
- Revised classification and treatment of various impaired creditor classes in the Plan.
In all, the amended filing offers greater detail regarding the Plan the City first proposed on Feb. 21 and the City's restructuring efforts. The City expects to file further amendments to the Plan and Disclosure Statement before the scheduled April 14 hearing to approve the final Disclosure Statement to reflect further developments in the City's Chapter 9 case. The City looks to exit its historic bankruptcy by late summer as a fiscally solvent municipality that is better able to provide basic services to its residents.
"The City continues to make progress with its creditors and retirees and hopes to reach agreement in the near term on a number of outstanding issues," said Kevyn D. Orr, Emergency Manager for the City of Detroit. "We believe that the Plan we have proposed, and continue to refine, is feasible and allows the City to reduce its staggering $18 billion in debt and live within its means. The Plan puts the focus back on providing essential public services to the City's nearly 700,000 residents."
Substantive changes or additions to the revised Plan and Disclosure Statement include:
- Detailed terms of the negotiated settlement between the City and UBS and Merrill Lynch over pension interest rate swap agreements on pension obligation certificates. Under this agreement, the City agrees to pay $85 million (down from $288 million) to settle the claims, and the counter parties agree to relinquish their interest in the City's casino tax and development revenue, currently worth at least $15 million a month, once the settlement amount is fully paid. UBS and Merrill Lynch also agree to vote in support of the Plan during the confirmation period.
- Creation of a separate class of impaired creditors holding claims related to retiree health, dental, vision and death benefits. This new impaired class will be treated the same way as other non-pension unsecured classes of claims.
- Greater clarification for retirees on how much pension benefit reductions would be should the two pension classes accept or reject the Plan (and the proposed $816 million in outside funding). Very generally speaking, for Police and Fire Retirement System participants, a 'Yes' vote would mean a pension benefit reduction of 6 percent and elimination of cost of living adjustments; a 'No' vote would entail a 14 percent benefit reduction and elimination of cost of living adjustments. Very generally speaking, for General Retirement System participants, a 'Yes' vote would mean a 26 percent pension benefit reduction and elimination of cost of living adjustments; a 'No' vote would mean a 34 percent pension benefit reduction and elimination of cost of living adjustments.
Copies of the Plan and Disclosure Statement, along with additional information and links related to the Chapter 9 case, can be found at http://www.detroitmi.gov/EmergencyManager.aspx. Bankruptcy Court filings are available online, free of charge, at http://kccllc.net/Detroit.
Miller Buckfire & Co., Jones Day, Ernst & Young and Conway MacKenzie Inc. are advising the City of Detroit on its restructuring.
SOURCE City of Detroit