Here we go. The long-awaited bankruptcy trial in federal court to decide on the validity of the city's plan to correct its disastrous financial situation and right the ship begins today at the courthouse in downtown Detroit.
Chad Livengood of The Detroit News reports that a key component to the city's plan is the "grand bargain." Livengood describes it as "the linchpin of the city’s plan to dump $7 billion in debt in bankruptcy court — will be put to the test in a long-awaited trial set to begin today in federal court."
He notes that two very disgruntled financial insurance companies, Syncora Guarantee Inc. and Financial Guaranty Insurance Co., the backers of $1.4 billion in troubled pension debt the city wants to expunge from its books, could be ruined if the plan goes through as is. The News reported over the weekend that Syncora was in talks with the city attorneys about possibly taking Detroit real estate, including the city airport, to satisfy its debt.
The News writes:
Syncora Guarantee Inc. and Financial Guaranty Insurance Co., the backers of $1.4 billion in troubled pension debt the city wants to expunge from its books, were in late settlement negotiations with Detroit’s attorneys last week. The two creditors are prepared to argue at trial that the grand bargain’s infusion of $816 million over 20 years solely for pensioners in exchange for the art unfairly discriminates against them.
Both bond insurers face the prospect of losses of up to 94 percent on the investments they insured, while most city retirees would have to endure modest single-digit reductions in the monthly pension checks.
