Detroit awaits adjustment plan as recent pension debt deal faces challenge
The Christmas Eve deal reached with some of Detroit’s major creditors, which would require the city to pay less than previously expected to satisfy debts, will face a legal challenge.
It comes as the countdown begins for the release of Emergency Manager Kevyn Orr’s plan of adjustment for the city.
The plan is supposed to be released by the end of the year or the first week of the new year, and it’s where pensioners will get to see exactly how much of a cut will happen.
Orr and his team of lawyers have been working for months to undo a disastrous deal inked under former Detroit Mayor Kwame Kilpatrick’s administration in 2005. It was supposed to fix and fund the city’s pension funds, but utterly failed. The city defaulted on it in 2009.
Orr originally reached a deal with UBS and Bank of America this summer, but federal bankruptcy judge Stephen Rhodes told them they needed to do better.
So, on Christmas Eve, another deal was reached -- which means Detroit has to pay back a whole lot less and frees up $180 million a year in casino revenue. Most of the money would go to improving city services.
Read: Detroit reaches deal with 2 banks to pay off debt
The deal has to be approved by Rhodes during a hearing on Dec. 31.
Unsurprisingly, the lawyer for the city’s pension funds will challenge the deal.
SPECIAL SECTION: Detroit bankruptcy
Download: Detroit Bankruptcy filing December 2013