|
 The agreement, which was incorporated into a revised debt
adjustment plan the city filed with the court late on Friday, added
to a pile of deals Detroit reached with other major creditors this
month.
It also increases the ranks of creditors that Detroit Emergency
Manager Kevyn Orr has lined up so far to support his plan to adjust
the city's $18 billion of debt and exit the biggest municipal
bankruptcy in U.S. history that was filed in July 2013.
"The deal, which includes significant protections and potential
enhancements for retirees under the city's plan, a cap on maximum
pension losses to individual retirees and significantly greater
funding for retiree healthcare benefits, reflects the significant
efforts of the nine-member committee and its professionals," said a
statement released by the retiree committee's law firm Dentons.
Sam Alberts, a Dentons attorney, said pension cuts agreed to by
Detroit's two retirement systems could be significantly restored
under certain circumstances.
According to the newly revised debt adjustment plan, a fund reserve
account would be used to restore cuts if the pensions' funded ratio
reaches a trigger level.
The revised plan also requires the systems to have special
committees in place to guide investments over a 20-year period.
Last week, the board of Detroit's Police and Fire Retirement System
accepted a deal that would result in no pension cuts for public
safety workers but would reduce cost of living adjustments (COLAs)
to 1 percent.
The General Retirement System board also accepted a deal for general
city workers that calls for a 4.5 percent cut in pensions as well as
the elimination of COLAs. The pension changes would be on a ballot
sent to thousands of Detroit's workers and retirees, who will be
asked to vote on the city's final debt adjustment plan.
But those deals and the one with the retiree committee depend on
$816 million the city would tap to aid its retired workers. Michigan
Governor Rick Snyder has asked the state legislature to approve $350
million of that amount, while the rest would come from philanthropic
foundations and the Detroit Institute of Arts, which pledged the
money to avoid a fire sale of art works due to the bankruptcy.
As for retiree healthcare, Alberts said that if Detroit succeeds in
invalidating $1.45 billion of pension debt sold in 2005 and 2006,
the money the city would have allocated to pay off that debt would
instead be tapped for retiree medical coverage.
[to top of second column] |
Earlier this month, Judge Steven Rhodes, who is overseeing Detroit's
bankruptcy case, approved a crucial settlement between the city and
two investment banks over costly interest-rate swaps. Also, the city
reached a deal with three bond insurance companies over the
treatment of voter-approved general obligation bonds.
Before the deal with the retiree committee was announced on Friday,
Orr said in a speech to the American Bankruptcy Institute in
Washington D.C. that there is still a lot of work ahead.
"Because despite some of the successes we've had with mediations and
some of the settlements we've announced we've got to negotiate
definitive documents," he said. "We've got to get through a plan
structure where some of our counterparties haven't agreed to
anything. ... That's going to be difficult."
Hold outs include bond insurance company Syncora Guarantee, which
has been fighting the city over the swaps settlement.
The city's revised plan did not disclose any resolution for
Detroit's water and sewer department.
Rhodes last week ordered the city and its three nearby counties into
mediation over the creation of a regional authority.
Orr's proposal to lease the city's water and sewer departments to a
regional authority for a hefty annual fee and using that money for
unrelated purposes had drawn objections by officials in Macomb and
Oakland counties, stalling previous talks.
(Reporting By Karen Pierog; additional reporting by Tom Hals and
Lisa Lambert in Washington; editing by David Gregorio & Kim Coghill)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
