Detroit sued swaps insurer Syncora Guarantee Inc., blaming it for the withholding of as much as $11 million a month in casino-derived revenue, city Emergency Manager Kevyn Orr said in a statement.
“Syncora is exerting power it does not have to get money to which it has no legal claim, and its actions are putting the city’s entire restructuring efforts in peril,” Orr said today in a statement announcing the Wayne County Circuit Court filing.
The filing couldn’t be immediately confirmed in court records. Michigan Governor Rick Snyder in March appointed Orr, an attorney, to lead the city out of a fiscal crisis that has put it on the brink of municipal bankruptcy.
Detroit seeks a court order barring Syncora and other defendants from taking any steps to limit the city’s access to revenues from its three casinos.
Michael Corbally, a spokesman for New York-based Syncora Guarantee, didn’t immediately reply to an after-hours e-mail request for comment. The company is a unit of Hamilton, Bermuda-based Syncora Holdings Ltd. (SYCRF)
Syncora insures some of the $1.4 billion in “Certificates of Participation” issued by the city to “shore up the underfunding” in two of its public employee pension funds in 2005 and 2006 as well as swap agreements through which the city hedges interest rates payable on some of the certificates according to Orr’s statement.
Casino-derived revenues were pledged to secure the swaps in 2009, according to Orr.
While the city has defaulted on some of those certificates, holders have been paid by Syncora. The city has not defaulted on the swap agreements, the emergency manager said.
A Wayne County judge today issued an order blocking a custodial bank from refusing to release payments and set a follow-up hearing for July 26, according to Orr’s statement.
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