Oh, Snap. Orr says, "How about I give you dimes for dollars, and we can call it even?

**corktownyuppie** · June-06-13, 11:47 PM

Game on.

http://www.freep.com/article/2013060...-Orr-creditors

**Honky Tonk** · June-07-13, 12:53 AM

Originally Posted by corktownyuppie

Game on.

http://www.freep.com/article/2013060...-Orr-creditors

I read it twice, didn't find "Oh Snap" anywhere.

**Toka313** · June-07-13, 07:24 AM

If he gets less than 10 cents on the dollar, I might even consider the EM law as effective. But then, he better haul his ass out of town after that regardless.

**Zacha341** · June-07-13, 07:28 AM

It's one of those soon to be banned phrases! Oh snap!

Originally Posted by Honky Tonk

I read it twice, didn't find "Oh Snap" anywhere.

**Honky Tonk** · June-07-13, 07:39 AM

Originally Posted by Zacha341

It's one of those soon to be banned phrases! Oh snap!

"Never put off to tomorrow what you can do today".....

**rb336** · June-07-13, 09:27 AM

Pennies on the dollar might end up being a better deal for creditors than bankruptcy, after you factor in the lawyers' fees they will pay for pushing their claims

**aj3647** · June-07-13, 10:32 AM

Good luck finding lenders to give the city money after this, though.

**motz** · June-07-13, 10:37 AM

Originally Posted by aj3647

Good luck finding lenders to give the city money after this, though.

I think this is a good solution to Detroit's "Lets go to the pay day lender to pay our bills" issue they seem to have had for a bit here. I hope the creditors end up with pennies on the dollar, they knew what they were getting themselves into and still did it anyway.

**Honky Tonk** · June-07-13, 10:37 AM

Originally Posted by aj3647

Good luck finding lenders to give the city money after this, though.

Good luck finding them now.

**corktownyuppie** · June-07-13, 10:39 AM

Originally Posted by aj3647

Good luck finding lenders to give the city money after this, though.

Um, I think that's a good thing. It means that we will not be able to borrow money for the near- to- intermediate future without a co-signer. Which is a good thing, because it means the co-signer can now control how funds are spent. This co-signer, free from the dysfunctional political environment, can be motivate primarily by effectiveness, efficiency, optimization of service....instead of political loyalty, ideological rhetoric, and delusion.

Which is also a good thing.

**michimoby** · June-07-13, 10:48 AM

Originally Posted by corktownyuppie

Um, I think that's a good thing. It means that we will not be able to borrow money for the near- to- intermediate future without a co-signer. Which is a good thing, because it means the co-signer can now control how funds are spent. This co-signer, free from the dysfunctional political environment, can be motivate primarily by effectiveness, efficiency, optimization of service....instead of political loyalty, ideological rhetoric, and delusion.

Which is also a good thing.

Who's going to co-sign, though?

Actually, I should dig into this more: on municipal debt, I assume it's the city/county Treasurer that puts his/her name to the document; can another municipality's Treasurer co-sign?

**GPCharles** · June-07-13, 10:50 AM

This is the proverbial "shot across the bow" - this thing is a LONG way from a settlement with anyone. However, without the real threat of an impending bankruptcy, the EM had absolutely no bargaining power.

**313WX** · June-07-13, 10:56 AM

Originally Posted by michimoby

Who's going to co-sign, though?

Actually, I should dig into this more: on municipal debt, I assume it's the city/county Treasurer that puts his/her name to the document; can another municipality's Treasurer co-sign?

The state of Michigan can co-sign the bonds.

**corktownyuppie** · June-07-13, 11:12 AM

Originally Posted by michimoby

Who's going to co-sign, though?

Actually, I should dig into this more: on municipal debt, I assume it's the city/county Treasurer that puts his/her name to the document; can another municipality's Treasurer co-sign?

On municipal debt, I believe that entity Treasurer signs document, but to be legal, it must be accompanied by documentation equivalent of some official resolution or minutes of meeting confirming resolution that necessary governmental bodies [[Mayor/City Council, etc.) approved bond issuance in accordance with municipal law.

As far as co-signer, anyone can co-sign a loan. The question is whose co-signature will the lenders accept? I agree with 313WX here, most likely co-signer is the state because of its credit rating. But any entity or individual could theoretically co-sign a loan.

"$100B Restructuring Bond Issuance Receives Michimoby Guarantee: Bond Rating jumps from CCC- to CCC!"

**michimoby** · June-07-13, 11:13 AM

Originally Posted by 313WX

The state of Michigan can co-sign the bonds.

And what if the state refuses to do so? Can Detroit have a private citizen co-sign?

**mwilbert** · June-07-13, 11:18 AM

After the city renegotiates its debt, assuming it does, it will have greater access to the credit markets than it has now, not less. Prospective lenders won't have to worry the old debt that no longer exists.

You may think that future lenders will exact a price for that, but you have to realize that lenders already know that Detroit is not creditworthy. Dealing with the problem just makes the situation more predictable.

**313WX** · June-07-13, 11:35 AM

Originally Posted by michimoby

And what if the state refuses to do so? Can Detroit have a private citizen co-sign?

The state of Michigan co-signed the BofA bond that the city has been using to function since the consent agreement.

For the state, it would be preferable over Detroit's bankruptcy, where everyone's credit would be damaged because of Detroit and the legal fees are more expensive.

**illwill** · June-07-13, 11:54 AM

I highly doubt many... IF any of these creditors will accept pennies/dimes on the dollar. If they don't end up negotiating a reasonable percentage with Orr then they'll most likely refuse to accept a deal and walk away empty handed. Mainly to get back at the city, in hopes of seeing Detroit file for bankruptcy, ruining Detroit's credit and then NEVER doing business with them again. This will be done out of spite.

But in Detroit's favor, at least the debts will be written off. It'll just be a matter of how the city builds from that point forward?

**TKshreve** · June-07-13, 12:26 PM

Originally Posted by michimoby

And what if the state refuses to do so? Can Detroit have a private citizen co-sign?

I heard Jack White is in the giving mood.

**Honky Tonk** · June-07-13, 12:29 PM

Originally Posted by michimoby

And what if the state refuses to do so? Can Detroit have a private citizen co-sign?

My Mom cosigned for me one time, I could ask.

**313WX** · June-07-13, 12:32 PM

Originally Posted by illwill

I highly doubt many... IF any of these creditors will accept pennies/dimes on the dollar. If they don't end up negotiating a reasonable percentage with Orr then they'll most likely refuse to accept a deal and walk away empty handed. Mainly to get back at the city, in hopes of seeing Detroit file for bankruptcy, ruining Detroit's credit and then NEVER doing business with them again. This will be done out of spite.

But in Detroit's favor, at least the debts will be written off. It'll just be a matter of how the city builds from that point forward?

The creditors are going to lose either way.

Bt some of them, foolishly, may think they can get a couple Van Goghs in a BK court proceeding and only take a modest haircut versus having to take pennies on the dollar.

**mwilbert** · June-07-13, 01:00 PM

Originally Posted by illwill

Mainly to get back at the city, in hopes of seeing Detroit file for bankruptcy, ruining Detroit's credit and then NEVER doing business with them again. This will be done out of spite.

The idea that filing for bankruptcy will ruin Detroit's credit makes no sense. Detroit's credit is already ruined. It would be better after bankruptcy, not worse.

**Toka313** · June-07-13, 01:05 PM

BK court CAN NOT force the city to do things they don't want to do. DIA art and other assets are in more danger under an EM deal and/or an EM run bankruptcy than one run by the city. The reason is that under Chapter 9 the stakeholders must agree to conditions.

The city would have the option to "say no" to liquidation. Creditors also have the option to "say no," however if you get one group of creditors to "say yes" then the others can be forced to follow suit.

IMO, a bankruptcy run by the EM is the most dangerous though because they have little to no interest in looking out for the long term prospects of the city. They are not accountable to the people or re-election so they are more prone to "give away the farm" in a Chapter 9 proceeding.

Also, I am unsure what would happen with pension funds and union obligations. Those unions would be among the people who would have the option to be represented in court. However, an EM could tear up the contract and effectively eliminate debts and such without the approval of the federal judge. [[Pensions notwithstanding, as they are run separately and previous precedent shows that the EM cannot touch or reform pension structures). So that's another reason that the EM is more dangerous in a Chapter 9 situation.

TL; DR: It's not the judge or the court to worry about with BK, it's the EM.

**313WX** · June-07-13, 01:14 PM

Originally Posted by Toka313

BK court CAN NOT force the city to do things they don't want to do. DIA art and other assets are in more danger under an EM deal and/or an EM run bankruptcy than one run by the city. The reason is that under Chapter 9 the stakeholders must agree to conditions.

The city would have the option to "say no" to liquidation. Creditors also have the option to "say no," however if you get one group of creditors to "say yes" then the others can be forced to follow suit.

IMO, a bankruptcy run by the EM is the most dangerous though because they have little to no interest in looking out for the long term prospects of the city. They are not accountable to the people or re-election so they are more prone to "give away the farm" in a Chapter 9 proceeding.

Also, I am unsure what would happen with pension funds and union obligations. Those unions would be among the people who would have the option to be represented in court. However, an EM could tear up the contract and effectively eliminate debts and such without the approval of the federal judge. [[Pensions notwithstanding, as they are run separately and previous precedent shows that the EM cannot touch or reform pension structures). So that's another reason that the EM is more dangerous in a Chapter 9 situation.

TL; DR: It's not the judge or the court to worry about with BK, it's the EM.

All of those points I agree with, especially the part about the EM being the receiver in the BK proceeding. Orr as the receiver could opt to put the DIA and DWSD for sale in the negotiations.

My hope is that if things go right [[it's more so a timing issue), by the time Detroit files for bankruptcy, PA 436 would be declared unconstitutional by the federal court.

**Toka313** · June-07-13, 02:17 PM

Originally Posted by 313WX

My hope is that if things go right [[it's more so a timing issue), by the time Detroit files for bankruptcy, PA 436 would be declared unconstitutional by the federal court.

And it would have to be the federal court, with the Michigan one packed with Republicans right now. Good point. I don't know about the chances that the NAACP and NAN have in Federal court though. Seems that they're best argument is that cities like Hazel Park had the same financial rating as Pontiac but didn't get an EM. But that's a tangent possibly worthy of another thread.