The city of Detroit has reached a settlement with Syncora Investments giving the historic Chapter 9 bankruptcy some headway. The city has faced financial woes for some time and is now moving forward with bankruptcy plans against the opposition of several financial institutions and individual citizens. Syncora, originally an opponent of the bankruptcy plans, has settled with the city agreeing to a 20 year extension on a 30 year lease to operate the Detroit-Windsor tunnel, in exchange the company will withdraw any opposition to the city’s bankruptcy.
Altogether, the deal is difficult to value, but people familiar with the accord have estimated Syncora will ultimately collect 20% to 25% of the approximately $200 million it’s owed.”
Despite the enormity of the deal, it’s not all smooth sailing for the Detroit bankruptcy. The city must face the bond insurer Financial Guaranty Insurance Co. (FGIC) and some 600 individual complaints. The case was to be presented before US bankruptcy Judge Steven Rhodes this morning but the settlement has upset plans, postponing the case until next week.
The city’s bankruptcy plan includes a forgiveness of $7 billion in liabilities and a reinvestment of $1.4 billion over 10 years. The Syncora Settlement suggests the support of global financial institutions Bank of America and USG. The banks have already agreed to a $85 million settlement with the city but expect Syncora and FGIC to cover losses made in a 2005 deal with the city. Despite losing Syncora as an ally, FGIC will continue to oppose the city’s bankruptcy.
Read More – Detroit, Creditor Reach Bankruptcy Deal (Nathan Bomey, Detroit Free Press, USA Today)