Detroit’s creditors, including bond insurers, asked the judge overseeing the city’s bankruptcy to give them a role in valuing its art collection, an asset that could be used to pay creditors owed $18 billion.
Bond insurers Financial Guaranty Insurance Co. and Syncora Guarantee Inc. asked U.S. Bankruptcy Judge Steven Rhodes to order Detroit to cooperate with a committee of creditors in determining how much the collection is worth.
“The city must demonstrate that its plan maximizes the value of the art to enhance creditor recoveries,” the creditors said in a filing today in U.S. Bankruptcy Court in Detroit. “The only way to prove this is to provide an assessment of the art based on arms-length market transactions.”
Since the city filed the biggest U.S. municipal bankruptcy case in July, creditors, including unions and retired city workers, have pushed it to consider selling some of the thousands of pieces held by the Detroit Institute of Arts.
The collection includes Diego Rivera’s two-story tall mural from 1933 titled “Detroit Industry,” as well as pieces by Edgar Degas, Pablo Picasso and Vincent van Gogh.
Kevyn Orr, the city’s emergency financial manager, hired Christie’s Inc. to value the art. He hasn’t said whether the city plans to sell any pieces to pay creditors.
Orr’s spokesman, Bill Nowling, didn’t immediately respond to an e-mail seeking comment on the creditors’ request.
Michigan’s attorney general issued an opinion in June concluding that the art is held in a charitable trust and can’t be sold to satisfy the city’s debts.
Rhodes still has to decide whether the city is eligible to remain under bankruptcy court protection. He said he will issue a ruling on Dec. 3.
Orr has said he will file a plan by the end of the year detailing how he would cut the city’s debt and exit bankruptcy. That plan must be approved by Rhodes after a vote of creditors.
Should creditors reject the plan, it would be more difficult for the city to win court approval because Rhodes must take the vote into account when making his decision.
The case is City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).