Retirement Systems say EM acted in haste to file City Bankruptcy when No Good Faith Negotiations have yet taken place
DETROIT, July 18, 2013 /PRNewswire/ -- The Retirement Systems of the City of Detroit are very dismayed at the Emergency Manager's decision to file for bankruptcy since no good faith discussions have occurred with the pension funds or major creditors, the Boards said in a joint statement.
"At a meeting with creditors on July 11, Mr. Orr said that the mere filing of a Chapter 9 petition doesn't preclude parties from continuing negotiations thereafter," said Robert Gordon, a Clark Hill attorney representing the city's retirement systems. "This position appears to ignore the Bankruptcy Code's requirement that a municipality engage in robust, good-faith negotiations before seeking Chapter 9 relief. While the Retirement Systems look forward to such negotiations, these have not yet occurred."
"While this action is very disappointing, we remain open to engaging in good faith negotiations at the earliest opportunity. From our perspective the door has not been closed to talks to help resolve the city's deficit issues," said George Orzech, Chairman of the Police and Fire Retirement System of the City of Detroit.
Gordon, the lead counsel in the restructuring effort says the Retirement Systems and many other creditors are still in a "due diligence" phase of evaluation of the numbers. Critically important, Gordon has pointed out that there is significant additional financial information that is not currently available and that is essential to enabling parties to negotiate. He said the next step would be "conceptual discussions" with the EM's team on options and then they could engage in good faith negotiations at the earliest opportunity.
In response to assertions that the Chapter 9 filing might occur, the Retirement Systems filed a lawsuit in Ingham County to block Gov. Rick Snyder from authorizing a filing that might override state constitutional protections for retiree pension benefits.
"We are surprised and disappointed that Emergency Manager ("EM") would file a Chapter 9 petition before he has had substantial negotiations with the Retirement Systems and other significant creditor constituencies," Gordon said. "To be clear, the EM's team and the Retirement Systems have not engaged in in-depth negotiations to date -- nor could they, since there is a significant amount of financial information not yet available that is critical to engage in such negotiations. The Retirement Systems and many other creditor groups are still in the due-diligence stage, working hard to gather and analyze information."
Gordon added that the fact due diligence is still underway is not surprising, nor reflective,of any dilatory behavior by any party. The Retirement Systems remain committed to a negotiation process.
"Any expectation that, within 30 days of having received access to the EM's data room, creditors could have fully completed their analyses as well as in-depth negotiations regarding a highly-complex restructuring of the City's finances, would be entirely unrealistic," he added.
SOURCE Retirement Systems of the City of Detroit