Bankruptcy Battle for Detroit to Begin Tuesday

From left, Chrysler executive Reid Bigland, General Motors' Mark Reuss, Ford Motor Co.'s Joe Hinrichs, Detroit Institute of Arts Director Graham Beal, Detroit emergency manager Kevyn Orr, Chief U.S. District Judge Gerald Rosen and Detroit Institute of Arts Chairman of the Board Eugene Gargaro Jr. listen during a news conference announcing pledges to the DIA's grand bargain commitment in June 2014 in the Rivera Court at the Detroit Institute of Arts. Detroit's bankruptcy trial starts Tuesday, Sept. 2, 2014, and the city is facing pressure to prove the grand bargain is fair. (Photo: Romain Blanquart, Detroit Free Press)
From left, Chrysler executive Reid Bigland, General Motors’ Mark Reuss, Ford Motor Co.’s Joe Hinrichs, Detroit Institute of Arts Director Graham Beal, Detroit emergency manager Kevyn Orr, Chief U.S. District Judge Gerald Rosen and Detroit Institute of Arts Chairman of the Board Eugene Gargaro Jr. listen during a news conference announcing pledges to the DIA’s grand bargain commitment in June 2014 in the Rivera Court at the Detroit Institute of Arts. Detroit’s bankruptcy trial starts Tuesday, Sept. 2, 2014, and the city is facing pressure to prove the grand bargain is fair.
(Photo: Romain Blanquart, Detroit Free Press)

Detroit’s historic Chapter 9 bankruptcy will culminate in a high-stakes court battle starting Tuesday that will determine the fate of the city’s sweeping plan that would pay pensioners more than financial creditors, preserve the Detroit Institute of Arts and slash more than $7 billion in debt while reinvesting in services. 

With the fate of pensioners’ pocketbooks, the museum and financial creditors on the line, the city is facing extraordinary pressure to prove that the grand bargain to resolve the bankruptcy and reinvest $1.4 billion over 10 years in services is fair.

The power to approve Detroit’s plan of adjustment or force the city to start over rests with Bankruptcy Judge Steven Rhodes, who will examine hundreds of exhibits and hear testimony from potentially more than 80 witnesses during a trial that could stretch through Oct. 17.

As Rhodes put it, the proceeding — called a “plan confirmation hearing” — will determine “the future of the city of Detroit.”

The city’s bitter feud with its holdout financial creditors will take center stage — with the powerful bond insurers bidding to prove the plan of adjustment is a disaster that must be rejected.

“This is the dramatic finale — like when you’re watching a movie, this is the big final battle,” said John Pottow, University of Michigan bankruptcy law professor. “There’s going to be fireworks flying.”

Winning the judge’s approval won’t be easy.

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Source: USA Today | Nathan Bomey, Detroit Free Press

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