U.S. Bankruptcy Judge Steven Rhodes (John Meiu / Courtesy of Detroit Legal News Publish)
Detroit — The city’s bankruptcy judge refused Tuesday to delay the process of approving Detroit’s debt-cutting plan, arguing the city would run out of cash if it takes too long.
“The problem with delay is the city will not have any more money to pay you if this is put off two or four or six months,” U.S. Bankruptcy Judge Steven Rhodes told attorney Carole Neville, who represents Detroit retirees. “(Detroit) is not a retail operation with a Christmas season coming.”
Following a 40-minute hearing, Rhodes filed a written order keeping Detroit’s bankruptcy case on track for a June 16 trial. During the trial, Detroit must prove it can accomplish a plan to shed debt and end the biggest municipal bankruptcy case in U.S. history.
Retirees and other creditors had asked the judge to slow approval of the debt-cutting plan to give them more time to file objections.
Rhodes gave them until April 1 — two extra business days.
Creditors urged Rhodes on Tuesday to delay the process. The city’s reorganization plan was missing crucial information and was “not ready for prime time,” argued an attorney for the city’s pension funds.
Citing some 34 missing exhibits to the 120-page plan of adjustment and a 440-page disclosure statement filed Friday with the U.S. Bankruptcy court, a group of creditors objected to setting deadlines next month for objections to the city’s “incomplete” bankruptcy exit plan.
Neville emphasized that no creditor had agreed to Detroit’s plan to restructure $18 billion in debt and urged Rhodes to slow the process so the city and various groups can reach agreements.
“We are looking at a total cramdown plan,” Neville told the judge.
Among the missing documents are details about the structure of future retiree health insurance benefits, the terms of the state’s pledge of $350 million toward city pensions and an overall plan to shield the Detroit Institute of Arts collection from a sale in exchange for private donor and foundations’ pouring another $465 million into pensions.
City bankruptcy lawyer Bruce Bennett said there would be supplemental documents filed but otherwise disagreed that the city had omitted information.
Before he adjourned the 40-minute hearing, Rhodes urged the city to clarify for creditors how much they will be paid under the plan, and when.
Robert Gordon, attorney for the city’s two pension funds, said the missing documents are “critical” to creditors understanding how the plan affects current and retired city workers.
“This plan is not yet ready for prime-time consideration,” Gordon wrote Monday in a court filing. “Although it was filed before this court’s March 1 deadline, it is not ripe for the setting of objection deadlines and hearing dates.”