On Friday, the city of Detroit filed its much-anticipated financial restructuring plan to federal court. The Wall Street Journal said the filing could a new round of maneuvering creditors to consider shaving off a portion of the payables the state owes.
According to the city plan, Detroit is looking to restructure $18 billion worth of long-term obligations by fully paying off secured creditors, pay a reduced amount in pension funds, with the remaining cash with a ratio of about $0.20 to a dollar to unsecured creditors.
Moreover, part of the plan will have the city of Detroit setting aside $1.5 billion in the next ten years for blight removal, capital improvements and upgrades in equipment and technology to make the city more efficient, cleaner and safer, said WSJ. Around $500 million of the allocation will be dedicated to blight removal, with an accomplishment target set within the next five years, officials reportedly said.
In a statement regarding its filing also on Friday, Detroit Emergency Manager Kevyn Orr said, "There is still much work in front of all of us to continue the recovery from a decades- long downward spiral. We must move swiftly to emerge from bankruptcy so that the financial distress harming the City can end."
Michigan Gov. Rick Snyder, who aided the state of Detroit to file for Chapter 11 protection in July last year, is asking creditors of the bankrupt state to reconsider settlement over the debt the city owes them. Snyder stated, "Let's use this plan as a call to action for a voluntary settlement as part of the mediation process to resolve the bankruptcy more quickly and soften the tough but necessary changes."
WSJ said that because of the filing, creditors will be able to view what the city plans for its obligations and will have the opportunity to object to some of the plan's provisions and vote on the plan. However, the newspaper said the final say will be handed down by US Bankruptcy Judge Steven Rhodes, who has the authority to overrule objections and could insist the plan on creditors without the latter's considerations.
