Detroit agreed to have a temporary court order lifted that bars Syncora Guarantee Inc. from trying to curb the city’s access to casino tax revenue after the city reached “an important settlement” with certain creditors.
The city said today in a court filing it would agree to dissolve the order, and sought an indefinite suspension of further exchange of documents in a lawsuit against the swaps insurer as well as postponement of a hearing on a preliminary injunction.
“The city reached in principle an important settlement with certain of its creditors late Friday afternoon, which we understand will be executed later today,” the city’s lawyers said in the filing in federal court in Detroit. “We believe this settlement moots many of the issues in this case.”
The filing didn’t specify what the settlement covered.
The city sued Syncora in state court this month, claiming the company was interfering with its banking relationships. A state court judge in Detroit on July 5 ordered a custodial bank to release payments to the city and set a preliminary injunction hearing for July 26.
Syncora moved the suit to federal court in Detroit and filed an emergency motion July 12 to lift the order and conduct document exchanges in the lawsuit on an expedited basis.
Bill Nowling, spokesman for Detroit Emergency Manager Kevyn Orr, didn’t immediately respond to a request for comment on the city’s action.
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.
The dispute with Syncora involves an account set up with U.S. Bank NA to hold tax money due to the city from its three casinos.
Should the city fail to pay a group of investors owed money under interest-rate swap contracts, those funds contractually could be frozen by U.S. Bank, according to court documents. Syncora told U.S. Bank the city was in default on its debts because Detroit had missed a $40 million payment on pension debt Syncora had insured, according to the complaint.
The city argued Syncora doesn’t have the right to freeze the casino tax revenue.
The lawsuit is City of Detroit v. Syncora Guarantee Inc., 13-cv-12987, U.S. District Court, Eastern District of Michigan (Detroit). The state court case is City of Detroit v. Syncora Guarantee, 12-008858-CZ, Circuit Court, Wayne County (Detroit).