Bond Insurers Lawsuits Could Delay Detroit BankruptcyMarch 18, 2014 – In The News
Michael Sweet was quoted in The Bond Buyer article "Bond Insurers Lawsuits Could Delay Detroit Bankruptcy." While the full text can be found in the March 18, 2014, issue of The Bond Buyer, a synopsis is noted below.
In a move attorneys say could derail Detroit’s effort to exit Chapter 9 bankruptcy, a pair of bond insurers has filed lawsuits challenging key aspects of the city’s bankruptcy plan.
On Tuesday, one company filed a motion asking U.S. Bankruptcy Judge Steven Rhodes to reject the city’s $85 million settlement agreement with its interest-rate swap counterparties.
This move followed another company on Monday asking to intervene in the Detroit’s lawsuit seeking to invalidate $1.4 billion of pension certificates of participation, which the city filed in January.
"In a lot of respects this is a chess game, and you've now got people staking out different positions," said Michael Sweet.
Sweet noted that the city’s unions are appealing Rhodes’ eligibility filing, while bond issuers have fought the city’s swaps settlements and now its repudiation of the certificates of participation.
"For everyone, you've got the undercurrent of when Orr's term expires in six months," Sweet said. "Some people have a sense that it would be good to run out the clock. The bonds don't do any better if they play nice than if they don't, so what do they have to lose?"
Sweet and other attorneys agreed that it’s politics as much as law driving this stage of the bankruptcy negotiations, and that ligation could take years.