Detroit— A holdout creditor ripped the “grand bargain,” Detroit’s public-relations spin and federal mediators in a scathing court filing Tuesday.
In the filing, bond insurer Syncora Guarantee Inc. said it is not to blame for a three-week delay of a trial over whether Detroit can implement its debt-cutting plan. Syncora has argued Detroit has delayed turning over documents and that it needed more time to prepare for trial.
Syncora called the city’s debt-cutting plan, which includes a “grand bargain”to bolster pensions and protect the city-owned Detroit Institute of Arts collection from creditors, a politically popular, but unfair, attempt to emerge from Chapter 9 bankruptcy.
“Chapter 9 does not allow for politically-popular outcomes that are not fair and equitable to all of its creditors and do not satisfy the other plan confirmation standards,” Syncora lawyer Stephen Hackney wrote.
The bankruptcy plan lowers taxes, increases hiring, leaves pensions “virtually untouched,” provides $1.5 billion for reinvestment and preserves an art collection at creditor expense, Hackney wrote.
Facing hundreds of millions in potential losses, bond insurance giants Syncora and Financial Guaranty Insurance Co. have been pushing for a sale of city-owned art at the Detroit Institute of Arts, which Orr has resisted.
The bond insurers contend more money could be extracted from the DIA than the $466 million private foundations and the DIA have offered over 20 years, coupled with a $195 million lump sum payment for Detroit pensioners.
“Syncora is aware that the positions it has taken in this case have not met with the favor of the city,” Hackney wrote. “And Syncora has been the subject of what can only be described as vitriol from the city on multiple occasions.”
The filing comes one day after U.S. Bankruptcy Judge Steven Rhodes delayed by three weeks the start of a July trial over the city’s debt-cutting plan.
The trial will start Aug 14.
Syncora objected to any suggestion it was to blame for the delay. Hackney singled out a quote from Emergency Manager Kevyn Orr’s spokesman that Syncora employed “delaying tactics.”
“It is no surprise that the city has undertaken a systematic public relations campaign to impugn Syncora and other creditors who are asserting their legal rights in what, by any standard, has been a highly politicized bankruptcy proceeding … ,” Hackney wrote.
He pointed to lobbying efforts and multiple press conferences by an “impartial” mediation team headed by Chief U.S. District Judge Gerald Rosen, who appeared in Lansing last week during a key Senate vote on the grand bargain.
Detroit has been “openly hostile to the so-called ‘Huns of Wall Street,’ to use Mr. Orr’s term,” Hackney wrote.