Decision Day Nears for Detroit Bankruptcy - Yahoo! Finance
http://www.zerohedge.com/news/2013-0...etroits-bankru
The governor gave permission...
When you can't pay, you can't pay... There was some in the article about trying to stymie the filing into extracting concessions {from what source of capital I wonder} but my guess is this will only decrease the recovery of everyone in the long run closer to nil.
http://www.zerohedge.com/news/2013-0...etroits-bankru
The governor gave permission...
Inability to Meet Obligations to Its Creditors. The City has more than $18 billion in accrued obligations. A vital point in Mr. Orr's letter is that Detroit tax rates are at their current legal limits, and that even if the City was legally able to raise taxes, its residents cannot afford to pay additional taxes.
The City's population has declined 63% from its peak, including a 28% decline since 2000. That exodus has brought Detroit to the point that it cannot satisfy promises it made in the past. A decreasing tax base has made meeting obligations to creditors impossible.
Most at risk under the expected bankruptcy case is the city's $11 billion in unsecured debt. That includes almost $6 billion in health and other benefits for retirees; more than $3 billion for retiree pensions; and about $530 million in general-obligation bonds.
Municipal-worker retirees are set to get less than 10% of what they are owed under the plan.
Municipal-worker retirees are set to get less than 10% of what they are owed under the plan.
If Detroit seeks Chapter 9 protection, Mr. Orr said he hopes to steer the city out of bankruptcy court in a record six to eight months, during which it would restructure about $20 billion in liabilities with creditors. His plan also calls for $1.25 billion in new spending, including efforts to reduce crime and eliminate blight.
But Mr. Orr said a Chapter 9 filing may go more smoothly for Detroit than other municipalities "because there is no other way out of here if we don't reach consensus."
A bankruptcy filing, according to Mr. Orr's team, could protect the city from related lawsuits filed by creditors and assemble all of the city's unsecured stakeholders in one class, likely the only way to deal with the thousands of pensioners.
Some in the municipal finance world object to Detroit's treatment of some of its outstanding general-obligation bonds as unsecured, offering pennies on the dollar for repayment. They say the move could result in higher borrowing costs for municipalities across Michigan and, potentially, the U.S.
A bankruptcy filing, according to Mr. Orr's team, could protect the city from related lawsuits filed by creditors and assemble all of the city's unsecured stakeholders in one class, likely the only way to deal with the thousands of pensioners.
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