By John Bringardner, Contributor
The City of Detroit may use the stay protections granted under Chapter 9 of the bankruptcy code to halt state court lawsuits against it, and extend those protections to Michigan Governor Rick Snyder, Detroit emergency manager Kevyn Orr, the state treasurer and certain other officials to allow the case to proceed, U.S. Bankruptcy Judge Steven Rhodes ruled this afternoon. …read more
Source: FULL ARTICLE at Forbes Latest
By The Huffington Post News Editors
DETROIT — It wasn’t easy making Detroit the largest U.S. city to file for bankruptcy protection, but it was the right decision, Michigan Gov. Rick Snyder said Sunday as he, the city’s mayor and its emergency manager made the television talk show rounds.
Snyder, a Republican, gave his blessing to emergency manager Kevyn Orr’s decision to file for bankruptcy for Detroit on Thursday.
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Source: FULL ARTICLE at Huffington Post
By The Huffington Post News Editors
By Nick Brown
July 21 (Reuters) – With more than $18 billion at stake in Detroit’s restructuring, big law firms and other advisers are clamoring to represent the city’s many creditors – including some advisers not exactly known for municipal work.
The city, which filed the largest-ever U.S. municipal bankruptcy on Thursday, tapped high-priced lawyers from Jones Day, financial advisers from Ernst & Young and restructuring consultants from Conway MacKenzie, court papers show.
For creditors and related parties, there is clearly a lot at stake. That means bondholders, insurers, retirees and others are sure to be accompanied in court by platoons of lawyers.
Detroit owes more than $8 billion in bond debt, and the insurers likely on the hook for those costs have already retained big-name law firms to take their cases.
Federal Guaranty Insurance Co tapped Weil Gotshal & Manges, according to a source close to the matter, who declined to be named because the information was not public as of Saturday. An attorney for Weil declined to comment.
David Dubrow, a lawyer at Arent Fox, confirmed on Saturday that he has been tapped by Ambac Financial Group.
And, according to the court’s electronic docket, Syncora hired Kirkland & Ellis, known for its corporate bankruptcy work, while Assured Guaranty retained Winston & Strawn, and National Public Finance Guarantee Corp hired Sidley Austin.
Bond insurers will play a key role in Detroit’s case. While a portion of the city’s $1.13 billion in general obligation bonds are secured by city assets, about $651 million of it is secured only by the ability to raise taxes. The city’s emergency manager, Kevyn Orr, has said he will treat that portion of the debt as an unsecured claim.
That classification, which has been largely untested in federal courts, is likely to be hotly contested and possibly litigated by bondholders or their insurers.
Detroit also owes $5.7 billion in unfunded healthcare and other benefits to retirees, and has …read more
Source: FULL ARTICLE at Huffington Post
By FOXBusiness
Filed under: Market News
By KATE ROGERS
Detroit made history Thursday as the largest American city in history to ever file for Chapter 9 bankruptcy protection. The once vibrant city rooted in auto manufacturing and music finally fell victim to its dire financial situation, with between $18 billion and $20 billion in debt.
While city emergency manager Kevyn Orr says it will be “business as usual” in Detroit, experts say residents may be impacted in three major areas–pensions, city services and tax rates.
The Pension Problem
The city has yet to confirm how pensions will be impacted, although there have been suggestions that pensions will be reduced, says Bob Tomarelli, IHS Global Insights economist. The wildcard in the situation is the fact that the Michigan state constitution has a provision which some union leaders say bars pension cuts.
The provision says “the accrued financial benefits of each pension plan and retirement system in the state and its political subdivisions shall be a contractual obligation which shall not be diminished or impaired thereby.”
“The next question here is what does the judge do? The provision seems pretty clear cut, but a judge can rule that they can cut pensions,” Tomarelli says.
There are an estimated 30,000 retirees who are currently receiving pensions, he says, and an estimated $9.2 billion in pension debts.
Pensions potentially have some major changes ahead, says Alison Fraser, Heritage Foundation senior fellow and director of government finance programs.
“They are already in lawsuits with the pension programs themselves,” Fraser says of the city. “It’s unclear what the legal questions are when you go into bankruptcy. There is some possibility pensions will be redone in some way, and it will be very difficult for those who area already retired on those pensions.”
Overall, Fraser believes bankruptcy was the right way to go, as the city was irresponsible with its finances and the process will allow Detroit to restructure its debt.
City Service Cuts
Orr says the filing is the “first step toward restoring the city” and that it will be business as usual in Detroit.
“He says the lights will stay on, but it depends on what haircut the creditors will take on secured bonds, and knowing if and how much pension payments will be cut,” Tomarelli says. “They then decide how much money will be cut and saved on public services.”
Detroit has lost a massive number of residents over the past half century, and now is home to around 700,000 citizens, post-auto bailout and Great Recession. Tomarelli says if the city cuts public services, it would likely be less appealing to potential residents.
“People are still leaving Detroit at a faster rate than they are Michigan,” he says. “If there is a great reduction in services, it may be a less attractive city to live in.”
Tax Hikes on the Way?
Detroit’s current tax …read more
Source: FULL ARTICLE at DailyFinance
By Micheline Maynard, Contributor
On Friday, Detroit’s emergency manager, Kevyn Orr, made a key point that many people distressed about Detroit have long been trying to articulate. Responding to a question about the outrage the city’s Chapter 9 bankruptcy has caused, Orr said, “I wish there had been a lot more outrage for the past 10, 20 years.” …read more
Source: FULL ARTICLE at Forbes Latest
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Detroit. The Motor City. Motown. Hitsville, USA. Hockeytown. The largest municipality ever to file for bankruptcy in US history. You can add that last one to Detroit’s many titles, as Republican Governor Rick Snyder authorized emergency manager Kevyn Orr to file a petition for bankruptcy yesterday.
Detroit’s Chapter 9 bankruptcy bid is likely to be very bad news for city employees, retirees and their families, but what does it mean for the auto industry? Automotive News spoke with Wall Street financial guru Steven Rattner, the same man that acted as President Barack Obama’s so-called auto czar, ushering General Motors and Chrysler through bankruptcies of their own, to see what parallels there will be between the two situations.
According to Rattner, bankruptcy for the city was inevitable, just like it was for GM and Chrysler. “It’s analogous to the auto companies, in that you have too many stakeholders whose claims are too underwater to realistically ever worked this out with some kind of bankruptcy,” Rattner told AN. But, Rattner cautions, “This will be much messier.” The auto bankruptcies took a brief six weeks, while the city’s case will likely last at least a few months, if not a year or more.
While the automaker presence in the city isn’t what it once was, GM still employs roughly 3,000 people at its Renaissance Center headquarters, right in the heart of downtown. Chrysler’s Detroit workforce is mainly blue collar, at the Jefferson North factory, which builds the Jeep Grand Cherokee and Dodge Durango. Ford, the only automaker not to go through bankruptcy, has limited its presence within Detroit city limits.
In a statement, GM said its “is proud to call Detroit home and today’s bankruptcy declaration is a day that we and others hoped would not come. We believe, however, that today also can mark a clean start for the city.” Ford shared a similar sentiment, with a release stating “The city has a difficult job ahead, and we are optimistic that governmental leaders will be successful in strengthening the community.” Chrysler, meanwhile, reiterated its commitment to the city, “We not only continue to invest in the city and its residents by adding to our presence in Detroit, we also are committed to playing a positive role in its revitalization.”
Detroit pins hopes to bankruptcy as Motor City sags originally appeared on Autoblog on Fri, 19 Jul 2013 10:58:00 EST. Please see our terms for use of feeds.
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Source: FULL ARTICLE at Autoblog
At the height of its industrial power, Detroit was an irrepressible engine of the American economy, offering well-paying jobs, a gateway to the middle class for generations of autoworkers and affordable vehicles that put the world on wheels.
But by Thursday, the once-mighty symbol of the nation’s manufacturing might had fallen from that pinnacle into financial ruin, becoming the biggest U.S. city ever to file for bankruptcy — the result of a long, slow decline in population and auto manufacturing.
Although the filing had been feared for months, the path that lay ahead was still uncertain. Bankruptcy could mean laying off employees, selling off assets, raising fees and scaling back basic services such as trash collection and snow plowing, which have already been slashed.
Kevin Frederick, an admissions representative for a local career training school, called the step “an embarrassment.”
“I guess we have to take a couple of steps backward to move forward,” Frederick said.
Now city and state leaders must confront the challenge of rebuilding Detroit’s broken budget in as little as a year.
Kevyn Orr, a bankruptcy expert hired by the state in March to stop Detroit’s fiscal free-fall, said Detroit would continue paying its bills and employees.
But, said Michael Sweet, a bankruptcy attorney in Fox-Rothschild’s San Francisco office, “they don’t have to pay anyone they don’t want to. And no one can sue them.”
The city’s woes have piled up for generations. In the 1950s, its population grew to 1.8 million people, many of whom were lured by plentiful, well-paying auto jobs. Later that decade, Detroit began to decline as developers starting building suburbs that lured away workers and businesses.
Then beginning in the late 1960s, auto companies began opening plants in other cities. Property values and tax revenue fell, and police couldn’t control crime. In later years, the rise of autos imported from Japan started to cut the size of the U.S. auto industry.
By the time the auto industry melted down in 2009, only a few factories from GM and Chrysler were left. GM is the only one with headquarters in Detroit, though it has huge research and testing centers with thousands of jobs outside the city.
Source: FULL ARTICLE at Fox US News
By John Johnson
The emergency manager who filed Detroit’s historic bankruptcy today says residents don’t have to worry about basic services getting cut in the interim, reports WXYZ . “Nothing changes from the standpoint of the average citizen’s perspective,” says Kevyn Orr. At a joint news conference, Mayor Dave Bing added, “Now that we’re… …read more
Source: FULL ARTICLE at Newser – Home
Detroit on Thursday became the largest city in U.S. history to file for bankruptcy, as the state-appointed emergency manager filed for Chapter 9 protection.
Kevyn Orr, a bankruptcy expert, was hired by the state in March to lead Detroit out of a fiscal free-fall and made the filing Thursday in federal bankruptcy court.
A number of factors — most notably steep population and tax base falls — have been blamed on Detroit’s tumble toward insolvency. Detroit lost a quarter-million residents between 2000 and 2010. A population that in the 1950s reached 1.8 million is struggling to stay above 700,000. Much of the middle-class and scores of businesses also have fled Detroit, taking their tax dollars with them.
In recent months, the city has relied on state-backed bond money to meet payroll for its approximately 10,000 employees.
Orr was unable to convince a host of creditors, the city’s union and pension boards to take pennies on the dollar to help facilitate the city’s massive financial restructuring. If the bankruptcy filing is approved, city assets could be liquidated to satisfy demands for payment.
“Only one feasible path offers a way out,” Gov. Rick Snyder said in a letter to Orr and state Treasurer Andy Dillon, approving the bankruptcy.
Snyder determined earlier this year that Detroit was in a financial emergency and without a plan to improve things. He made it the largest U.S. city to fall under state oversight when a state loan board hired Orr in March. His letter was attached to Orr’s bankruptcy filing.
“The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services,” Snyder wrote. “The city’s creditors, as well as its many dedicated public servants, deserve to know what promises the city can and will keep. The only way to do those things is to radically restructure the city and allow it to reinvent itself without the burden of impossible obligations.”
A turnaround specialist, Orr represented automaker Chrysler LLC during its successful restructuring. He issued a warning early on in his 18-month tenure in Detroit that bankruptcy was a road Detroit and its creditors did not want to tread.
He laid out his plans in June meetings with debt holders, in which his team warned there was a 50-50 chance of …read more
Source: FULL ARTICLE at Fox US News
By The Huffington Post News Editors
By Steve Neavling
DETROIT, April 3 (Reuters) – Detroit’s new state-appointed emergency manager on Wednesday disavowed letters sent by the mayor’s office saying that the city would stop honoring contracts with its police, fire and paramedics’ labor unions.
The apparent miscommunication between Mayor Dave Bing and Kevyn Orr, the former bankruptcy lawyer brought in to clean up Detroit’s finances, highlights the challenges Orr may face as he assumes increasing power in the biggest state takeover of an American city in more than two decades.
Written to Michigan’s five commissioners of employment relations, the letters declared that as of March 28, the destitute city considered itself in receivership status and no longer bound by its union contracts. March 28 is the date when a Michigan law went into effect giving the emergency manager wide powers including to abrogate union contracts.
Orr’s spokesman, Bill Nowling, said the emergency manager had no warning that the letters would be sent.
“That letter was not authorized by the emergency manager and we are looking into it,” Nowling said. “Any action of that sort has to be authorized by the emergency manager and this was not.”
A spokesman for Mayor Bing, who has said he will try to work with the emergency manager, declined to comment.
According to a copy of the letters, written by Lamont Satchel, the city’s director of labor relations, the city was freed from all collective bargaining agreements under state law once it was in receivership.
“The City is no longer obligated to participate in collective bargaining,” said the letters, which were given to Reuters by a union official copied on the correspondence.
The letter also declared the city’s withdrawal from all mediations and arbitrations and ordered Michigan’s bureau of employee relations to dismiss any pending union issues. The bureau mediates and arbitrates labor disputes on which the city and its unions cannot reach agreement.
The city’s unionized police, fire, and paramedics are working under …read more
Source: FULL ARTICLE at Huffington Post
By The Huffington Post News Editors
DETROIT — A bankruptcy lawyer and turnaround expert tasked with reviving Detroit’s beleaguered finances could be greeted by a crowd of protesters as he arrives at work Monday, then plans to spend his first day meeting with some city officials who for months fought against creating his job at all.
Kevyn Orr is under no illusions that he’ll be treated as a hero when he begins his duties as the Motor City‘s emergency manager, an appointment that makes Detroit the nation’s largest city ever put under state control. But while there are plenty of sacrifices – including Orr’s resignation from a powerful law firm where he was a partner – Orr says he is motivated by the opportunity to engineer one of the greatest fiscal turnarounds in U.S. history.
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Filed under: Taxes, Breaking News
DETROIT (AP) – The auto-industry turnaround expert picked to steer Detroit back from the brink of financial ruin had tax liens on his Maryland home, records show.
Kevyn Orr, Detroit’s new emergency financial manager, had two outstanding liens on his $1 million home in Chevy Chase, Md., for $16,000 in unemployment taxes in 2010 and 2011, The Detroit News reported Saturday. The Maryland state records also show that two other liens of more than $16,000 in unemployment and income taxes were satisfied in 2010 and 2011.
Orr, a partner in the Cleveland-based law firm of Jones Day who represented Chrysler during its successful restructuring, was appointed Detroit’s financial manager by Michigan Gov. Rick Snyder on Thursday.
Orr said Friday he didn’t know anything about the liens when shown the records by the News. On Saturday, the Washington, D.C., bankruptcy attorney said he now is paid up on state liens.
“It’s on me – it’s something that fell through the cracks,” Orr told the Detroit Free Press.
Orr, 54, apologized for the oversight, saying he always tries to be attentive to such matters and wasn’t aware of the liens until he was notified about them on Friday.
“It’s remarkably embarrassing,” Orr said. “I called and paid it up Friday. I wanted to make sure I addressed it as soon as I could.”
Sara Wurfel, a spokeswoman for Snyder, said the governor’s office wasn’t aware of the liens until the News asked about them.
“It did not come up in any of the vetting,” she said.
Critics of the emergency manager said the liens are troubling, because one of Orr’s jobs will be to improve Detroit’s tax-collecting operations.
Detroit is saddled with a $327 million budget deficit and more than $14 billion in long-term debt. City records estimate that Detroit collected $32 million less in income taxes than it was owed in 2011.
“It’s quite interesting that (Orr) feels he could manage the city of Detroit, and he’s having trouble managing his own affairs,” said the Rev. Charles Williams II, president of the National Action Network of Michigan and an opponent of Orr’s appointment.
By The Huffington Post News Editors
An expected state takeover has been the hottest of hot button issues in Detroit, and Gov. Rick Snyder‘s Thursday announcement of a state takeover and the appointment of Kevyn Orr to the position of emergency financial manager (EFM) is likely to bring even more heat to the situation.
Many residents of the majority African-American city feel the appointment of an EFM is a form of political disenfranchisement. In Detroit, some are now engaging in political protest and civil disobedience in an effort to make their voices heard.
During Snyder’s Thursday press conference at the Cadillac Place building in Detroit’s New Center district, a crowd of picketers from Good Jobs Now, the National Action Network and other groups made clear their opposition to the EFM appointment.
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More on Detroit Politics
Filed under: Debt, U.S. Government, Economy
Standard & Poor’s Ratings Services today revised upward its outlook on the city of Detroit’s general obligation bonds, from ‘negative’ to ‘stable. The ratings upgrade affects the city’s unlimited- and limited-tax general obligation bonds and its pension obligation certificates. S&P affirmed its ‘B’ ratings on the bonds.
In its note announcing the revised outlook, S&P cited the appointment of an emergency manager by the state’s governor as “a positive step toward regaining structural balance and improving the city’s overall financial condition.” A cynic might ask how Detroit’s condition could get any worse.
The negative outlook was assigned to Detroit’s rating a year ago, before the consent agreement between the city and the state was enacted. S&P noted that “[s]ince that time, the city has made changes, but the pace has been slow, exacerbated by distractions within city government.” Like the conviction of former mayor Kwame Kilpatrick on federal corruption charges. That’ll take your eye off the ball for sure.
Michigan’s governor yesterday appointed experienced bankruptcy lawyer Kevyn Orr as the city’s emergency financial manager. Orr will have to figure out how to deal with $14 billion in long-term debt, cash shortages, and a growing number of citizens’ complaints.
Filed under: 24/7 Wall St. Wire, Bankruptcy, Economy, Politics
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By John Johnson 
Source: FULL ARTICLE at Newser – Home
By Micheline Maynard, Contributor
After months of political bickering and legislative maneuvering, Detroit finally got an emergency financial manager on Thursday. But the appointment of Jones, Day bankruptcy specialist Kevyn Orr does not mean the city will avoid a court-ordered restructuring. …read more
Source: FULL ARTICLE at Forbes Latest
