For Release and Posting Following the Conclusion of the Oral Opinion
O
RAL
O
PINION ON THE
R
ECORD
In re City of Detroit Bankruptcy Judge Steven Rhodes November 7, 2014
Table of Contents
Introduction ......................................................................................1
The Plan ...........................................................................................2
The Grand Bargain ...........................................................................3
The Pension Settlement ....................................................................4
The Annuity Savings Fund Recoupment Settlement .......................8
The State Contribution Agreement ................................................10
The DIA Settlement .......................................................................12
The OPEB Settlement ....................................................................14
The 36th District Court Settlement ................................................15
The UTGO Settlement ...................................................................15
The LTGO Settlement ....................................................................16
The COPS Settlement ....................................................................17
The Syncora Settlement .................................................................18
The FGIC Settlement .....................................................................19
Good Faith .....................................................................................20
Best Interests of Creditors ..............................................................22
Fees ................................................................................................25
Unfair Discrimination ....................................................................28
Fair and Equitable ..........................................................................33
The Constitutional Claims Against the City ..................................35
The Exit Financing .........................................................................37
Feasibility .......................................................................................38
Conclusion .....................................................................................44
1
I
NTRODUCTION
In chapter 9 of the bankruptcy code, the federal government offers help to the states in solving a problem that, under our constitutional structure, the states cannot solve by themselves. That problem is the adjustment of the debts of an insolvent municipality. Today, this federal bankruptcy court grants that help to the State of Michigan and the City of Detroit. The Court concludes that the City’s eighth amended plan of adjustment meets the legal requirements for confirmation. Accordingly, the Court confirms that plan. The Court also concludes that the settlements incorporated into the plan of adjustment are reasonable, fair and equitable. Accordingly, the Court approves those settlements. The Court also concludes that the City’s proposed exit-financing meets the requirements of the bankruptcy code. Therefore, the Court approves the exit financing. This oral opinion will first address the settlements. There are no outstanding objections to the settlements, except for the ASF recoupment portion of the pension settlement. Nevertheless, the City requested the Court to determine that they are reasonable, fair and equitable. The Court will then review the major issues relating to confirmation. These are good faith, best interests of creditors, professional fees, unfair discrimination, fair and equitable, and the treatment of the constitutional claims against the City. The Court will then briefly review the City’s request for approval of the exit financing. The Court will then address feasibility and conclude. The Court will soon issue a supplemental opinion that will more fully address all of the issues.