DETROIT -- A major opponent of Detroit's blueprint for shedding debts and remaking city services announced Monday that it had reached a settlement with the city and will now support Detroit's emergence from the nation's largest municipal bankruptcy.
But another of Detroit's holdout creditors was unable to reach a settlement on the same bankruptcy claim after several days of mediation, lawyers said Monday, leaving uncertain how quickly the city could shed debts and emerge from reorganization.
Representatives for Syncora Guarantee, a bond insurer that had for months had objected to the city's proposed blueprint, told a federal judge overseeing Detroit's bankruptcy that it will now support the city.
"This is a big day for Syncora and a big day for the city of Detroit," said Ryan Bennett, a lawyer representing Syncora, which has said its claim amounted to about $400 million.
David Heiman, a lawyer representing the city, said the settlement is a significant step in bringing Detroit closer to departing court oversight "as soon as possible and to return the city to its citizens."
Still, representatives of Financial Guaranty Insurance Co. of New York, another bond insurer, and some other creditors will miss out on a portion of the money that Detroit used to close its deal with Syncora. They made it clear that they intend to continue their objections to the city's reorganization plan and sought a delay in the city's trial so they can further prepare their cases.
Last week, Syncora abruptly announced an agreement in principle with the city, a week into a trial over whether Detroit's exit strategy could be confirmed by the bankruptcy court. Until its announcement, Syncora was one of a few remaining opponents of Detroit's plan of debt adjustment. Syncora went so far as to file a formal objection to the handling of the case under a team of mediators led by Gerald Rosen, who is also the chief judge of the U.S. District Court for the Eastern District of Michigan, the seat of Detroit's bankruptcy court.
Syncora argued that Rosen was biased and that his leadership of the mediation had given rise to a settlement plan that improperly favored Detroit's retirees over capital-markets creditors. Syncora retracted those objections Monday and offered an apology to Rosen.
"Judge Rosen has done a great service to the community, and we thank him for his willingness to assume this role and for providing the leadership that he has," James Sprayregen, a lawyer representing Syncora, said in a declaration filed with the bankruptcy court.
When Syncora said last week that it had a preliminary agreement with the city, the confirmation trial was halted until Monday so representatives of Syncora and other parties could attempt to agree on specific details of a settlement.
Preliminary outlines of the agreement said it offered Syncora a stake in vehicle tolls from the tunnel that runs between Detroit and Windsor, Ontario, as well as interests in some land that would rise in value as Detroit's recovery moved forward. But Syncora said Detroit had offered those items outside the bankruptcy, in what it called a "redevelopment agreement." That meant none of the assets being offered to Syncora would be shared with Financial Guaranty or the other creditors that hold uninsured certificates in a 2005 borrowing that are now in default.
That left Financial Guaranty and the others with a far less satisfying settlement with Detroit, even though they were said to be getting the same recovery rate in the bankruptcy as Syncora, about 13 cents on the dollar. Although Financial Guaranty's claims were classified the same as Syncora's, its proposals for an acceptable settlement were different. For months, it has been making the case that the city's art collection should be included in the assets available for settlements, and it had been working with a lending consortium on a loan for Detroit that would be secured by the art.
Since early this year, Detroit officials have said they hoped to reach agreements with as many of their thousands of creditors as possible to speed the process of leaving bankruptcy, to avoid endless appeals over core issues such as cuts to pensions.
A Section on 09/16/2014