Judge Confirms Detroit Plan to Exit Historic Bankruptcy
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A U.S. judge on Friday confirmed Detroit's plan to adjust $18 billion of debt and exit the biggest-ever municipal bankruptcy.
The ruling by U.S. Bankruptcy Court Judge Steven Rhodes, who is overseeing the historic case, came more than two months after the start of a hearing to determine whether the 1,165-page plan was fair to creditors and feasible for the city to implement.
Speaking from the bench, Rhodes said the city acted in good faith when it proposed its plan to shed about $7 billion of debt and invest $1.7 billion over the next several years to improve services and attract residents and business.
Once a symbol of U.S. industrial strength, Detroit fell on hard times due to population loss, rampant debt and financial mismanagement that left it unable to provide basic services to residents. During the 15-1/2-month bankruptcy process, the city even considered selling its historic collection at the Detroit Institute of Arts in order to pay off creditors.
Detroit's odyssey through Chapter 9 municipal bankruptcy began on July 18, 2013, with major creditors girding for battle and has wound down in a flurry of settlements. A so-called Grand Bargain taps into $816 million from foundations, the Detroit Institute of Arts and the state of Michigan to ease pension cuts and protect city-owned art work from sale.
Two companies that guaranteed payments on Detroit bonds, Syncora Guarantee Inc and Financial Guaranty Insurance Co, received options to develop parcels of land.
Rhodes said the city's ability to mitigate cuts to retiree pensions "borders on the miraculous."
Attending Rhodes' ruling were Detroit's state-appointed emergency manager, Kevyn Orr, who took Michigan's biggest city to bankruptcy court, and Mayor Mike Duggan, who is now tasked with carrying out the plan.
(Additional reporting by Karen Pierog in Chicago; editing by David Greising, Lisa Shumaker and Matthew Lewis)