Syncora is now on board

[professorscott]

Deal changer.

http://www.detroitnews.com/article/2...ankruptcy-deal

[Danny]

Syncora has no choice, accept the Grand Bargaining or get what's left of Detroit City Government's payment arraingments.

[Honky Tonk]

Syncora should go with the freep. They're giving them $.26 on the dollar.

[maverick1]

I found this interesting:

"The city also will give Syncora millions in return for the firm’s pledge to help fight bond insurer Financial Guaranty Insurance Co., which is fighting Detroit’s debt-cutting plan.

From The Detroit News: http://www.detroitnews.com/article/2...#ixzz3CrtxfNU8"

So, now that Syncora is squared away are they really going to help Detroit screw the other banks/financial institutions? What's in it for them to do this?

[lpg]

I found this interesting:

"The city also will give Syncora millions in return for the firm’s pledge to help fight bond insurer Financial Guaranty Insurance Co., which is fighting Detroit’s debt-cutting plan.

From The Detroit News: http://www.detroitnews.com/article/2...#ixzz3CrtxfNU8"


So, now that Syncora is squared away are they really going to help Detroit screw the other banks/financial institutions? What's in it for them to do this?

The jackels are eating each other,

[animatedmartian]

So, now that Syncora is squared away are they really going to help Detroit screw the other banks/financial institutions? What's in it for them to do this?

Money, duh.

It's now in Syncora's best interest to get this bankruptcy over with and start reaping the profits of this deal. If FGIC holds up the bankruptcy then that's holding up Syncora's profits.

[professorscott]

Money, duh.

It's now in Syncora's best interest to get this bankruptcy over with and start reaping the profits of this deal. If FGIC holds up the bankruptcy then that's holding up Syncora's profits.

I'm waiting for bankruptcyguy to weigh in on this, but my [[limited) understanding is that if you are the only holdout, it's difficult for you to do very much holding up of the resolution of this.

FGIC is in a very difficult position. Being last doesn't give them much leverage with which to bargain, so if any kind of deal is offered them at all, they'd be best off taking it. Syncora was smart to do what they did. They'll be better off, almost certainly, with what they negotiated than with what otherwise would have been crammed down their throats.

BG, what say you?

[corktownyuppie]

I found this interesting:

"The city also will give Syncora millions in return for the firm’s pledge to help fight bond insurer Financial Guaranty Insurance Co., which is fighting Detroit’s debt-cutting plan.

From The Detroit News: http://www.detroitnews.com/article/2...#ixzz3CrtxfNU8"

So, now that Syncora is squared away are they really going to help Detroit screw the other banks/financial institutions? What's in it for them to do this?

Money. Or, more accurately, the perception that they are maximizing the money that they will get when this is over.

I'm sure anyone can Monday Morning Quarterback about whether or not they should have taken a deal earlier, but none of us know what deals were being offered. Who knows, the City may have been holding on to some sweeteners and just decided to play them at the last minute to see if Syncora would bite.

The two interesting things I see are the following:

[[1) We don't know how the Judge would rule in the bankruptcy proceedings, but it seems evident that Syncora realized that their position was getting worse, not better.

[[2) Syncora may have been willing to look not just at the present value of vacant land [[zero-to-negative) but rather the future profits that *could* be realized if they successfully develop it. In this way, it's a win-win for everyone...Detroit gives up something that's practically worthless, Syncora takes on the investment in a rebounding city, putting everyone on the same side. If people keep moving back downtown, Syncora will reap the profits from successfully developing riverfront real-estate...and the city gets someone with the cash to buy it.

[nain rouge]

OK, um, can anyone explain when Detroit will experience ANY negative side effects from declaring bankruptcy? Or should every city start hitting the bankruptcy jackpot?

[corktownyuppie]

OK, um, can anyone explain when Detroit will experience ANY negative side effects from declaring bankruptcy? Or should every city start hitting the bankruptcy jackpot?

Well, Detroit as a political institution has lost of all of its independence for the foreseeable future. Even after emergency management is over, our budgets will be overseen and require approval from a state-appointed board.

Bankruptcy has been [[and will be even moreso) good for Detroit-ers.
But if you were in political power before and compare it to the political power you have now, it's pretty rough.

I don't think any political leader wants that or themselves unless it's the last possible option out of desperation.

[DetroitPlanner]

Syncora should go with the freep. They're giving them $.26 on the dollar.

It is more than that the deal also involves revenues from the tunnel and parking.

[Honky Tonk]

It is more than that the deal also involves revenues from the tunnel and parking.

Both reports, Detroit Noose and the freep, are from from anonymous sources "close to the action". I'll wait until the official announcement before commenting. I am glad Syncora decided to fold. I'd like to see the City start heading in a more positive direction.

[Wesley Mouch]

Well, Detroit as a political institution has lost of all of its independence for the foreseeable future. Even after emergency management is over, our budgets will be overseen and require approval from a state-appointed board.

Bankruptcy has been [[and will be even moreso) good for Detroit-ers.
But if you were in political power before and compare it to the political power you have now, it's pretty rough.

I don't think any political leader wants that or themselves unless it's the last possible option out of desperation.

The real question is whether current political leaders continue to cut the sort of buy-now, pay-later deals. California's political class is bragging about how much money they have now -- so they are restoring spending. I think we need a structural change in how city & state finances and pensions are handled before we'll see whether the march towards insolvency continues, nd that 'last possible option' becomes the only one on the table.

[nain rouge]

Well, Detroit as a political institution has lost of all of its independence for the foreseeable future. Even after emergency management is over, our budgets will be overseen and require approval from a state-appointed board.

I wouldn't say Detroit has lost all of its independence. That strikes me as hyperbolic. So the final budget now requires state approval. Big deal. At the end of the day, Detroit is still putting the budget together. Sure, the days of truly wasteful spending are over, but it still seems like a win-win for just about everyone in Detroit. Certainly, I'd imagine the city has more spending power now than it did in the final moments before declaring bankruptcy, and it was also able to give pensioners a good long-term kick in the mouth.

As far as I'm concerned, other cities might as well start maxing their "credit cards" right now. Citizens make out like bandits, and the politicians get credit for seeing the city through to a brighter future. With all the investment around downtown, there's still plenty of pork in the barrel for Detroit politicians. The "stringent" state oversight will just be a blip on their radar. I doubt the state is about to oppose The Great Ilitch.

[professorscott]

Both reports, Detroit Noose and the freep, are from from anonymous sources "close to the action". I'll wait until the official announcement before commenting. I am glad Syncora decided to fold. I'd like to see the City start heading in a more positive direction.

I think the fact that Hon. Mr. Rhodes was asked for, and granted, a delay in order for the sides to finalize the deal is sufficiently official. Having said that, of course this deal is not finalized, and perils remain, but I am guardedly optimistic.

Which is as good as it gets, by the way. In 30 years of living in and around Detroit I've never felt better than guardedly optimistic about anything whatever.

[corktownyuppie]

I agree with some, even much, of what you say. But there are areas where we differ.

I wouldn't say Detroit has lost all of its independence. That strikes me as hyperbolic. So the final budget now requires state approval. Big deal. At the end of the day, Detroit is still putting the budget together.

Well anytime a political act requires your signature, you have leverage. When you have the power to overrule a proposal, you hold the hammer. I agree with you, of course, that this will result in what will likely be better budgets. But I see the budget oversight, somewhat like a co-signer on a car loan. Sure, in the end, you'll end up choosing the car and be responsible for paying the bills. But the co-signer wields a lot of silent power. If he/she thinks you should be buying the Ford Fusion instead of the Lincoln MKZ, he/she can just refuse to co-sign your loan.

Not that you'd be unhappy with the brand new Fusion...but it is a bit humbling to know that your decisions can be overridden.

Sure, the days of truly wasteful spending are over, but it still seems like a win-win for just about everyone in Detroit. Certainly, I'd imagine the city has more spending power now than it did in the final moments before declaring bankruptcy, and it was also able to give pensioners a good long-term kick in the mouth.

For sure.

As far as I'm concerned, other cities might as well start maxing their "credit cards" right now. Citizens make out like bandits, and the politicians get credit for seeing the city through to a brighter future. With all the investment around downtown, there's still plenty of pork in the barrel for Detroit politicians. The "stringent" state oversight will just be a blip on their radar. I doubt the state is about to oppose The Great Ilitch.

Easier said than done. Sure you're right, if it were possible. But this case is a landmark eye-opening deal for investors everywhere. You'll notice when you look at the creditor class payouts that most classes got less than 30%, but a handful of creditors which required collateral got 100%.

Here's what's gonna happen. You wanna max out your credit cards? No problem. But the banks are gonna either ask for collateral on every deal, or they will jack up your interest rates. Or they won't lend you the money at all.

This will certainly change the way bonds get rated and where investors want to put their money. Great Lakes Water [[formerly DWSD) borrowing money? No problem since you're offering collateral and essentially using state credit.

But Wayne County needing to float a new bond? Probably not going to happen without finding a co-signer or guaranteeing payments from something like Metro Airport.

[Honky Tonk]

I think the fact that Hon. Mr. Rhodes was asked for, and granted, a delay in order for the sides to finalize the deal is sufficiently official. Having said that, of course this deal is not finalized, and perils remain, but I am guardedly optimistic.

Which is as good as it gets, by the way. In 30 years of living in and around Detroit I've never felt better than guardedly optimistic about anything whatever.

A poster once made the comparison of breakthrough announcements in Detroit to Lucy pulling the football away from Charlie Brown @ the last minute.

[BankruptcyGuy]

I'm waiting for bankruptcyguy to weigh in on this, but my [[limited) understanding is that if you are the only holdout, it's difficult for you to do very much holding up of the resolution of this.

FGIC is in a very difficult position. Being last doesn't give them much leverage with which to bargain, so if any kind of deal is offered them at all, they'd be best off taking it. Syncora was smart to do what they did. They'll be better off, almost certainly, with what they negotiated than with what otherwise would have been crammed down their throats.

BG, what say you?

Yes, FGIC will be in a very difficult position, because there would now be an issue that a creditor does not feel that a plan would violate the Chapter 9 rules, and another creditor SIMILARLY SITUATED does. It's not quite, but close, to the concept that the judge won't really believe FGIC's objections.

The Court is performing its own analysis, but I think the weight of the evidence is pretty clear.

[nain rouge]

Here's what's gonna happen. You wanna max out your credit cards? No problem. But the banks are gonna either ask for collateral on every deal, or they will jack up your interest rates. Or they won't lend you the money at all.

That'll happen for awhile, sure. But as we always see with the finance industry, once the storm settles, they go right back to their old ways. When raises hinge on yearly or even quarterly performance, it doesn't take long before creditors begin lowering standards.

And yeah, we hear that some creditors took "0.26" on the dollar, but how much did they collect in interest before that? What was poor Syncora's total take from the city vs. what was ultimately lent? Plus, Syncora essentially took the international tunnel for another 20 years in the deal, got $6.5 million towards another purchase in the city, now controls one of the top parking garages [[for 30 years), and will get a bunch of parking revenue in addition, as well as some vacant land. So Syncora got its collateral.

Politicians will continue to find a way to get loans. As long you're OK with de facto privatization [[and most are), you'd better get those credit cards out and spend, spend, spend.

[BankruptcyGuy]

So the final budget now requires state approval. Big deal. At the end of the day, Detroit is still putting the budget together.

In the discussions of the particular legislation, the biggest change is that Detroit will have to follow particular accounting rules [[some of which didn't even apply to the state a few years ago):

No accounting gimmicks to balance the budget;
Proper recognition of income and expenses; and
No using asset sales as "income" to balance things up.

That will be a sea change for Detroit. It was a big change when the state stopped the chicanery a few years ago. Many cities and school districts still do this stuff. Glad that Detroit will be at the forefront of doing things properly.

[ABetterDetroit]

All this deal making is speeding up the clock on exiting bankruptcy. With everything that is already happening it will get really interesting when the city can bring new assets to the table. Police, fire, capital improvements, blight removal for just a few that will get a big jump in funding post bankruptcy. Keeping fingers crossed that it is finished in the near future instead of years from now.

[Willi]

Municipal Bonds are a weird entity in that no one ever expected a city to default.
Upon default, the only real asset, is city owned land, and no creditor wants empty lots.
Creditors KNEW what they were getting into, and now cry over getting burned by the risk.
No sympathy for any of them.

Generally speaking, municipal bonds are considered safer than corporate bonds,
for the simple fact that governments are less likely than companies to fail
and default on their obligations. ALL of them knew that before buying DETROIT bonds

[animatedmartian]

Interesting statement by FGIC after the city made the deal with Syncora;

​Backed into a corner, FGIC, which could lose more than $1 billion on Detroit debt it insured, has dwindling prospects to get paid off.

“We have always been, and remain, open to good-faith settlement discussions with the city,” FGIC said in a statement Wednesday. “The latest deal reinforces our view that the city has abundant sources of incremental value available for distribution” to financial creditors."

http://www.freep.com/article/2014091...y-Syncora-FGIC

Of course incremental being the keyword here. I can't really tell, but this doesn't seem to imply that they'll continue to holdout but at the same time it almost sounds like they believe they will still get a good deal. Maybe they'll just avoid admitting defeat and come out and say "Oh, we meant to reach a deal like this!" whatever that deal turns out to be.

[Willi]

CrainsDetroit.com hit it square on the head today :

“The majority of the city’s water mains are between 70 and 90 years old and failing at a rapid rate. Detroiters have suffered through more than 5,000 water main breaks in just the last three years. Rebuilding 1 percent [[30 miles) of its system each year at a cost of about $25 million would have put the city on par with the national average. However, DWSD has spent no more than $3.4 million in each of the last three years to rebuild its mains.”

Does Metro Detroit want driveable roads, clean water to drink, or the toilets to flush ..........................?

http://www.detroitmi.gov/GreatLakesWaterAuthority.aspx

[rex]

Bankruptcy has been [[and will be even moreso) good for Detroit-ers.

And this is exactly what it should be about.