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Detroit Water Customer Oakland County Attacks Debt Plan

Detroit’s debt-adjustment plan can’t be approved under bankruptcy rules, officials from adjacent Oakland County told the judge overseeing the city’s record $18 billion case.

For months, Oakland County and other suburban water users have been negotiating with Detroit’s emergency financial manager, Kevyn Orr, over his proposal to bring about $47 million into the city by creating a new agency that would run the city’s water and sewer system.

Oakland County, which uses Detroit’s water and sewer service, said in a court filing today that the city hasn’t provided creditors enough information about such a proposal.

Today is the deadline for creditors to say whether Detroit has put enough information about the debt plan in an explanatory disclosure statement. Oakland County went further in its filing, saying the plan itself can never be approved because it treats creditors with similar claims differently.

“The plan’s distribution scheme could not be more discriminatory,” the county said in its filing in federal court in Detroit.

Other Creditors

Other creditors, including bond insurer Berkshire Hathaway Assurance Corp., Ambac Assurance Corp., Syncora Guarantee Inc. and National Public Finance Guarantee Corp., filed objections to Detroit’s plan, according to court filings.

The Water and Sewer Bond trustee, unions for city employees and nearby Macomb County also raised objections.

Macomb County said the city hasn’t given it and other agencies negotiating over the proposed new water agency enough information.

“Because these services constitute a public service monopoly, the debtor does not have the unfettered right simply to transfer operations to anyone it chooses under any terms it prefers for its own economic advantage or otherwise,” Macomb County said in its objection.

The city on April 17 will ask a judge to let it send the disclosure statement to creditors including retirees and bondholders to solicit their votes on the debt-reduction plan, filed Feb. 21. The plan calls for cutting public worker pensions and some bond payments.

The case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).

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