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 Bond insurance companies Financial Guaranty Insurance Co and
Syncora Guarantee, as well as European banks and others had asked
the U.S. Bankruptcy Court to direct the city and the Detroit
Institute of Arts (DIA) to cooperate with their efforts to assess
the art work in an effort to develop offers to monetize all or some
of it.
Judge Steven Rhodes, who is overseeing Detroit's historic bankruptcy
case, declined to force the city to cooperate with the effort,
turning down a request to remove art work from the walls of the DIA
for appraisal purposes. But he said that DIA was willing to give
creditors access to works not on display.
"We were hopeful that the city would cooperate fully with the four
parties that expressed interest in entering into transactions that
would fully monetize the art, which could generate up to $2 billion
for the city and creditors, substantially greater value than the
city would receive pursuant to the so-called 'grand bargain,'" FGIC
said in a statement.
Under the city's plan to adjust $18 billion of debt and exit the
biggest municipal bankruptcy in U.S. history, philanthropic
foundations, the DIA and the state of Michigan would come up with
$816 million over 20 years to ease pension cuts on Detroit retirees
and prevent a sale of art to pay city creditors.
FGIC said that deal places politics over the financial and legal
realities of the situation "and will almost certainly result in
drawn-out litigation that no one wants."
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FGIC and Syncora, which are on the hook for making full payments on
Detroit bonds they insured, are in a shrinking group of creditors
continuing to fight the city's debt plan. Kevyn Orr, Detroit's
state-appointed emergency manager, has been reeling in settlements
with other creditors including the city's two retirement systems.
According to the court filing by FGIC and other creditors, the
entire art collection could fetch $1.75 billion if it were sold or
could be used as collateral for a $2 billion loan.
"The city could use the proceeds of the loan to make the
contributions to the retirement systems it currently proposes to
fund pursuant to the DIA Settlement, and to enhance recoveries to
unsecured creditors," the filing stated.
(Reporting By Cherie Curry in Detroit, additional reporting by Karen
Pierog in Chicago; editing by Andrew Hay)
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