Detroit — A holdout creditor said Monday it sympathizes with retirees who face cuts in Detroit’s bankruptcy case but still wants access to the personal financial information of 20,000 retired city workers.
Syncora Guarantee Inc. continued an incendiary spat with the city over Detroit’s plan to shed debt and emerge from bankruptcy court. The bond insurer said Detroit is demonizing it for wanting to sell the Detroit Institute of Arts collection to benefit creditors, including retirees, and for requesting information the city wants to use for its own purposes.
The filing comes days after Detroit’s bankruptcy attorneys asked U.S. Bankruptcy Judge Steven Rhodes to block Syncora from gaining access to the personal financial information. The city said Syncora’s request “crosses the line.”
“Chapter 9 bankruptcies are a tempting place to break out the torches and pitchforks and pursue the city’s lenders through the streets,” Syncora lawyer Stephen Hackney wrote. “It is a time-honored and politically-popular approach.”
Syncora is fighting a plan to limit pension cuts at the expense of other unsecured creditors.
“But the bankruptcy code deplores — and forbids — a city from favoring one class while showing animus and unfairness to another,” Hackney wrote. “And there is no more important time for the law to be enforced than in the name of its least popular creditors.”
The Bermuda-based bond insurance company facing the prospect of losing hundreds of millions of dollars if Detroit is successful in wiping out a Kwame Kilpatrick-era pension debt deal that is blamed for plunging the city into bankruptcy.
Rhodes set a hearing on the request for financial information for Thursday.
The insurer has been aggressively seeking a sale of city-owned art and has made numerous legal moves in Detroit's 11-month-old bankruptcy to slow the city's efforts to exit Chapter 9 proceedings.
More than 32,000 retired and active city workers are eligible to vote on the city's plan to reduce their pension benefits — a plan the city's largest labor union endorsed last Friday.
Syncora has served the city with 80 document requests, some of which Rhodes called "unreasonable" earlier this month when he delayed a planned trial over Detroit's debt-cutting reorganization plan by three week.
Syncora attorney William Arnault has said the bond insurer would accept information about retiree finances that does not identify them by name and just lists the town and state they live in.
“Syncora can sympathize with the bitter taste in retirees’ mouths that must attend even modest cuts to the pensions they spent years earning,” Hackney wrote.
By making money off the DIA collection, retirees and creditors would get more money than under the city’s debt-cutting plan, Hackney wrote.
“But rather than follow this approach, the city has taken the low road of setting pensioners and financial creditors at each other’s throats — and crafted an unconfirmable plan in the process,” Hackney wrote. “But in sowing more poison and discord into the soil of this case, the city only deepens a divide that every Detroiter should hope could be bridged.”
Chad Livengood contributed