Detroit files for bankruptcy
State-appointed Emergency Manager Kevyn Orr asked a federal judge permission to place the city into Chapter 9 bankruptcy protection. Now, there is a time frame of 30 to 90 days during which it will be determined whether the city is eligible for Chapter 9 protection. It will be also determined how many claimants might compete for the resources that Detroit has to offer.
The bankruptcy petition would seek protection from creditors and unions who are renegotiating $18.5 billion in debt and other liabilities.
A month ago, Detroit emergency manager Kevyn Orr presented a plan to invest $1.25 billion over 10 years, trying to avoid the largest municipal bankruptcy in U.S. history. At a meeting with creditors and labor union representatives, emergency Mr. Orr presented his plan focusing on deep cuts in payments owed to contractors, creditors, and municipal retirees. Mr. Orr cut the long story short: the plan addresses the needs of the city first, and creditors second, he said.
Unfortunately, Mr. Orr's plan didn't work because there was no will at the other side: The two pension funds which have claims to $9.2 billion filed suit to prevent Mr. Orr from cutting retiree benefits.
Mr. Orr's spokesman said "Pension boards, insurers, it's clear that if you're suing us, your response is 'no.' We still have other creditors we continue to have meetings with, other stakeholders who are trying to find a solution here, because they recognize that, at the end of the day, we have to have a city that can provide basic services to its 700,000 residents," writes Detroit Free Press. ■