Detroit’s plan to cut its $18 billion in debt would be due March 1 if the city survives an effort by creditors to throw it out of bankruptcy, according to a schedule proposed by the judge in the case.
The proposed timetable filed today by U.S. Bankruptcy Judge Steven Rhodes sets the trial over Detroit’s eligibility to be in bankruptcy for October, earlier than the city’s emergency manager, Kevyn Orr, has suggested. He has proposed filing pretrial briefs on the issue in November.
After today’s proposal was reported, Detroit limited-tax general obligations maturing in April 2014 traded at about 96 cents on the dollar, the lowest since February, according to data compiled by Bloomberg. The most debt exchanged hands since March 2012. Ambac Assurance Corp. insures the securities. Prices plunged on similar bonds that are due in April 2018, according to the data.
Orr has said he wants to get Detroit out of bankruptcy by September 2014, the same month he could be removed from his post by the city council. He and Michigan Governor Rick Snyder, who appointed him, both said in interviews last week that their deadline would be difficult to meet.
“Based on what’s happened in other large Chapter 9 cases, it can take several months or maybe even over a year just to resolve eligibility questions,” said Patrick Darby, a bankruptcy attorney in Birmingham, Alabama, at Bradley Arant Rose & White LLP who represents Jefferson County.
Detroit filed the biggest U.S. municipal bankruptcy on July 18 after decades of decline left it unable to pay its debts and provide needed services. Public pension funds have said the filing, which could bring cuts in benefits, violated state law.
The judge said he will solicit comments on his proposed timetable at an Aug. 2 hearing.
The case is City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).
To contact the reporter on this story: Steven Church in Wilmington, Delaware at firstname.lastname@example.org