Attorney: Plan best Detroit can offer creditors
DETROIT (AP) — An attorney for Detroit concluded his opening statement Wednesday in the city's bankruptcy trial by saying the debt-restructuring plan focused first on resolving a dire financial situation and does not discriminate against creditors.
The plan of adjustment, which is Detroit's blueprint for emerging from the largest municipal bankruptcy in U.S. history, has to be followed in order for the city to be stronger and viable, Bruce Bennett told federal Judge Steven Rhodes during the trial's second day.
Detroit also followed bankruptcy rules when developing the plan, which has gone through several changes over the past few months, Bennett said.
"The city did all of this with the proper purpose of restructuring its financial affairs," Bennett said, adding, "The facts will show Detroit has earned this court help."
Detroit wants to cut $12 billion in unsecured debt to about $5 billion through its plan of adjustment, which must be approved by Rhodes. The plan's architect, state-appointed emergency manager Kevyn Orr, guided Chrysler through its bankruptcy.
Most creditors, including more than 30,000 retirees and city employees, have endorsed the plan of adjustment. The strongest opposition is coming from New York-based Syncora Guarantee, who has said its claims with the city are about $400 million.
Attorneys for the creditors are expected to give opening statements later Wednesday.
The trial is likely to take a number of days, during which lawyers from the city and other creditors will debate the city's debt, the rights of its creditors and what is allowable under bankruptcy law. Dozens of witnesses are expected to be called — including Orr and possibly Detroit Mayor Mike Duggan.
Syncora and some other creditors have pushed for the city to look into the sale of assets, including city-owned pieces in the Detroit Institute of Arts.
The threat to artwork also prompted the creation of the so-called Grand Bargain — commitments from the state, major corporations, foundations and others to donate more than $800 million over 20 years meant to soften cuts to city pensions while placing pieces in the DIA into a trust and out of the reach of debtor demands.
Pensioners this summer voted in favor of Orr's plan, which calls for general retirees to take a 4.5 percent pension cut and lose annual inflation adjustments. Retired police officers and firefighters would lose only a portion of their annual cost-of-living raise.