Detroit— The city’s $7 billion debt-reduction plan is all but certain to win the approval of more than 32,000 current and future city pension recipients as the final votes remaining to be tallied are “extremely unlikely” to reverse the outcome, people briefed on the plan said Sunday.
The outcome would be a major victory for the city in its effort to win the backing of major creditors ahead of an Aug. 14 trial that will determine whether Detroit wins court approval to restructure debt in the biggest municipal bankruptcy in U.S. history.
Lawyers for the city and major creditors spent an anxious weekend monitoring returns after Friday’s deadline passed for retirees, bondholders, banks and other creditors to submit votes on Detroit’s debt-cutting plan.
“We’re hopeful and anxiously awaiting results that will be very telling about how the rest of the bankruptcy is going to proceed and how retirees are going to be treated going forward,” if U.S. Bankruptcy Judge Steven Rhodes approves the city’s plan, Ryan Plecha, an attorney for two city retiree associations, said Sunday.
Rhodes has ordered the city and several creditors to appear in court at 10 a.m. Monday. He will consider several lingering motions and discuss, in a confidential hearing, a request from the city that he take a bus tour of the blighted city.
The Detroit News reported Friday that more than two-thirds of the members of Detroit Police and Fire and civilian pension plans had voted in favor of the plan as voting came to a close, citing two people briefed on the results.
Both plans had also garnered more than two thirds of the total value of the claims — another requirement under bankruptcy rules.
Two people briefed on the plan said it is “extremely unlikely” that the final votes to be counted would be enough — even if overwhelmingly negative — to reverse the direction of the vote. There’s no indication that the trend lines are likely to change, they said.
A preliminary tally is expected to be completed by a California firm by late Monday, though Detroit doesn’t plan to disclose it formally until July 21.
The News reported Saturday that slightly more police and fire pension plan members are backing the plan compared with the civilian plan, sources familiar with the balloting said.
Based on the estimated votes left to be counted, it appeared both classes would approve the plan by significant margins, even if nearly all of the remaining votes were negative. The only remaining issue was whether both classes of voters would have yes votes from pension recipients holding two-thirds of the claims.
Now it appears that there aren’t enough remaining votes that could shift the balance on the issue of the value of the claims.
In both plans, retirees are supporting the plan by more than double the votes of active workers — but retirees outnumber active workers. Neither plan has majority support among active employees. A separate question on whether to endorse health care changes has won almost universal backing from plan members, a source said.
“We’re all waiting with bated breath to find out what the results are on the balloting,” said Bruce Babiarz, spokesman for the Detroit Police & Fire Retirement System. “And we look forward to getting the official results on the balloting next week.”
Chad Livengood contributed.