Detroit files second amended plan of adjustment, disclosure statement

By Caroline Salls

Pittsburgh, April 16 - The City of Detroit filed an amended Chapter 9 plan of adjustment and related disclosure statement Wednesday with the U.S. Bankruptcy Court for the Eastern District of Michigan.

Detroit said in Tuesday court filings that it could only confirm resolution of one of 100 objections to the disclosure statement from parties in interest but that it did make significant progress in meetings and communications with objectors in narrowing the range of topics to be presented at the April 17 disclosure statement hearing.

The city said the meetings and communications with parties in interest resulted in "significant revisions" to the disclosure statement.

Detroit said some of the outstanding objections may ultimately be resolved by additions made to the disclosure statement.

On Wednesday, judge Steven Rhodes set the procedures for the April 17 disclosure statement hearing.

Specifically, the city will have 20 minutes to make an opening presentation, each party who filed an objection and participated in the court-ordered meet-and-confer process will have five minutes to argue their objection, and the city will then have 30 minutes to respond to the objections.

Creditor treatment

Treatment of creditors under the second amended plan filed Wednesday would include the following:

• Unimpaired water and sewer bond claims will be reinstated. Holders of impaired water and sewer bond claims will receive either new bonds equal to the principal amount of the existing bonds or cash equal to the principal and interest owed, at the city's option.

Holders of sewer and water bonds that vote to accept the plan can choose to receive new existing-rate bonds instead of the other new bonds;

• Holders of revolving sewer bond claims will have their claims reinstated;

• Secured general obligation claims, other secured claims, parking bond claims and HUD installment note claims will be reinstated;

• Holders of limited tax G.O. bond claims, other unsecured claims and Downtown Development Authority claims will receive new unsecured shares of new B notes;

• Holders of unlimited tax G.O. bond claims will receive a share of restructured UTGO bonds;

• If currently disputed COP claims are ultimately allowed, holders could elect to participate in a settlement in connection with some or all of the portions of COP claims that would be deemed assigned to it. A disputed COP claims reserve will be established on the plan effective date;

• Holders of convenience claims will recover 25% in cash; and

• Holders of subordinated claims will receive no distribution.

Previous plan comparison

In comparison, creditor treatment under the first amended plan was slated to include the following:

• Holders of water and sewer claims would receive, if a water and sewer department transaction was completed on the plan effective date, either new bonds with a principal amount equal to the principal amount of existing bonds or cash in the full amount of the claim.

If no transaction was completed, bonds would be reinstated.

Holders who vote to accept the plan could elect to receive new existing-rate bonds in lieu of the other proposed new bonds;

• Holders of revolving sewer bond claims would receive either new GLWA revolving bonds equal to the principal amount of the DWSD existing bonds if a transaction was completed or their bonds would be reinstated if it was not completed;

• Secured G.O. claims, other secured claims, parking bond claims and HUD installment note claims would be reinstated;

• Holders of limited tax G.O. bond claims, other unsecured claims and Downtown Development Authority claims would receive new unsecured shares of new B notes and/or new C notes, for a 15% recovery;

• Holders of unlimited tax G.O. bond claims would receive a share of plan UTGO notes, with a maturity that is no longer than the existing notes' maturity;

• If currently disputed COP claims are ultimately allowed, holders could elect to participate in a settlement in connection with some or all of the portions of COP claims that would be deemed assigned to it. A disputed COP claims reserve would be established on the plan effective date;

• Holders of convenience claims would recover 25% in cash; and

• Holders of subordinated claims would receive no distribution.

Detroit filed bankruptcy on July 18, 2013 under Chapter 9 case number 13-53846.

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