July 10--Internal City of Detroit documents obtained by the Free Press spell out the percentage cuts for each group creditors, with the city predicting it will be able to dump more than $7 billion in debt and liabilities, or about 74%, in Chapter 9 bankruptcy.
Here are some highlights:
-- Limited-tax general obligation bondholders: The documents reveal for the first time that the city expects to pay limited-tax general obligation bondholders 34 cents on the dollar for their $164 million debt. The city had already revealed in June that it reached a tentative settlement with Ambac Assurance and Black Rock, but terms of the deal had not been revealed.
-- Pension liabilities: The city expects to reduce its unfunded pension liabilities by 54%. The city will reduce those liabilities to $1.45 billion from $3.13 billion through the bankruptcy. That's because civilian retirees are being asked to accept 4.5% monthly pension cuts, the elimination of annual cost-of-living-adjustment (COLA) increases and a claw back of excessive annuity payments into the city's employee savings plan. Police and fire retirees are being asked to accept a reduction in COLA with no cut to pension checks.
-- Retiree healthcare: The city is also cutting its retiree health care obligation by 89%, slashing a $4.3 billion obligation to $450 million that will be paid to two independent trusts that will administer benefits.
-- Pension debt deal: The other major source of debt cuts is a $1.4 billion borrowing deal orchestrated by former Mayor Kwame Kilpatrick in 2005 to eliminate the city's pension liabilities at the time. The debt -- called pension obligation certificates of participation -- has been a major source of contention in the bankruptcy because the city has argued the entire deal was illegal and should be wiped out. Syncora and Financial Guaranty Insurance Co. (FGIC) -- the bond insurers that backed the deal -- and a group of European banks that own some of the debt would receive 11 cents on the dollar, according to the Miller Buckfire documents.
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