Detroit plans $7 billion debt cut in bankruptcy

July 10, 2014 – In The News
The Detroit News
Michael Sweet was quoted in The Detroit News' article, "Detroit plans $7 billion debt cut in bankruptcy." Full text can be found in the July 10, 2014, issue, but a synopsis is below.

According to figures that emerged Thursday ahead of the trial over Detroit’s restructuring plan, Detroit plans to dramatically cut retiree pension and health care cuts in order to pay off 7$ billion in debt in bankruptcy court.

Michael Sweet, as an experienced bankruptcy attorney, comments that shedding a big amount of debt is important but the city still has to be able to service its remaining debt and operate effectively for its residents.

He continues: “The trick is to focus on putting the city in the best possible position going forward, without the burden of prior debt on its shoulders,” Sweet said. “The question isn’t as much about shedding the debt as it is about what are you going to look like when you come out of bankruptcy. The question is, is the city positioning itself so that it won’t end up back in the same hole? If you leave some amount of debt and the operations can cover that debt, great.”

Miller Buckfire & Co. has billed the city more than $2.8 million for work, such as spearheading negotiations over a potential offshoot of the Detroit Water and Sewerage Department and securing financing for the city.

Sweet explains that the potential $28 million payday for Miller Buckfire may well be worth it.

“Just because the number is large doesn’t mean it’s not acceptable,” Sweet said. “There’s a huge amount of money at issue and a lot of work that needs to be done to get the city back on its feet. I have to believe that if this deal is too sweet we’ll be hearing about it from others.”