Recognizing I may be called a heretic, I caught this in the Detroit Free Press today:
http://www.freep.com/article/2013090...unds-Kevyn-Orr

I always wondered how the financing was going to work out for this place. When it was conceived it was called one of the most complex mortgage transactions with something like 22 levels of financing. Now we see that the two Detroit pension funds are not being paid by the developer.

The Detroit General Retirement System [[GRS) has never received a debt service payment for the $9.0 million investment they made in the hotel. They have already marked their principal investment to zero and probably will never collect any of the interest due them over the past six or seven years. If they thought they would earn 8.0% on that money, then they also lost another $5.04 million. IIRC the GRS sits in a third mortgage position, so the first and second mortgage lenders have to be repaid all of their money BEFORE any funds can flow to the GRS.

The Detroit Police & Fire Retirement System [[P&F) did not lend any money directly to the hotel. Rather, they were a co-signer, guarantor, for a $15.0 million loan made by First Independence Bank. When FI Bank could not get a personal guaranty from the developer, someone approached the P&F to guaranty the loan instead of the lender. So, when FI Bank did not receive its debt service payments, then the P&F has to make the payments. Assuming an 8.0% interest rate on the FI Bank loan, that means P&F has to pay about $1.2 million each year to FI Bank. Additionally, if FI Bank does not receive its $15.0 million principal, then the P&F must repay that too. BTW, I think FI Bank sits in the sixth mortgage position.

Is this a great county, or what???