A strong bankruptcy deal for Detroit
If we didn’t know better, we might think the settlement Detroit reached with its last major holdout creditor is a gift to the city rather than the product of hard fought negotiations aimed at settling a $1.1 billion claim.
Detroit appears to have got the better of this deal.
Under the settlement, Detroit will “let” the creditor redevelop the Joe Louis Arena site, which the Red Wings are leaving for a new home downtown.
The Financial Guaranty Insurance Co. says it will replace Joe Louis with a hotel, riverfront condominiums and retail shops.
That deal not only resolves a major obstacle to settling Detroit’s bankruptcy, it also removes what could easily have been a headache for the city.
The largest question coming out of the decision by the Red Wings to move to a massive new Cass Corridor complex was what would happen to Joe Louis.
Finding an investor willing to take on the riverfront piece is a two-fer for the city — it gets the new arena development and an exciting project along the river.
Turning FGIC from a legal adversary into an investor was a brilliant stroke by the city’s negotiators, and is typical of how the bankruptcy process has unfolded.
Previously, creditor Snycora settled its claim in part by accepting land for redevelopment.
Both companies are on a short timetable for starting the work, assuring the city will reap the benefits of the settlements fairly soon.
In reality, the city likely would have had to give the land away anyway, or sell it at a deep discount, to attract developers.
This deal, if approved by the court, encourages development of the land, and Detroit is out from under another big debt. It’s hard to imagine a better outcome.