Detroit Bankruptcy Creditors Object to City's Disclosure

Detroit creditors are expected to file a flood of objections to the city's disclosure statement this week, setting the stage for a clash with the city at an April 17 hearing over whether the document contains enough information about the city's restructuring plans.

Creditors are expected to file objections for a litany of reasons, including proposed pension reductions, cuts to bonds and health care benefits and controversial financial projections.

Some creditors are also expected to argue that the city is not properly accounting for the value of the Detroit Institute of Arts and the city's water department, which are considered the city's most valuable assets.

If the city can convince Judge Steven Rhodes that the disclosure statement contains adequate and accurate information about the city's debt cutting proposal and post-bankruptcy restructuring plans, the city will win the right to send voting packets to creditors.

Rhodes will consider arguments about the disclosure statement in a hearing April 17.

The first major creditor to object to the disclosure statement today was the American Federation of State Ciity and Municipal Employees Council 25, the city's largest general employee union.

Detroit emergency manager Kevyn Orr's plan “would violate Michigan law, eviscerate and perpetuate the trampling of the constitutionally protected rights of the AFSCME Employees, and leave many AFSCME Employees facing individual bankruptcy and unable to afford basic life necessities such as rent, mortgage payments, drugs, medical insurance, or the like,” AFSCME said in a court filing.

Orr has said it's necessary to drastically cut the city's $18 billion in debt and liabilities to allow the city to reinvest in city services. He wants to invest $1.5 billion over 10 years on top of the usual city budget to improve public protection and remove blight.

Contact Nathan Bomey: 313-223-4743 or nbomey@freepress.com. Follow him on Twitter @NathanBomey.

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