Detroit amended plan hints at regional authority, incorporates tender

By Caroline Salls

Pittsburgh, Aug. 21 – The City of Detroit filed its expected sixth amended plan of adjustment on Wednesday with the U.S. Bankruptcy Court for the Eastern District of Michigan.

The sixth amended plan incorporates the tender process for previously announced Detroit Water and Sewerage (DWSD) bonds.

To the extent any tendered bonds are accepted and the process is completed, all DWSD bonds will be unimpaired, according to a release from Fitch Ratings.

However, if no tendered bonds are accepted, the impairment status for the bonds will be the same as in the previous version of the plan.

DWSD bond treatment

According to the amended plan, if the city accepts some or all of the DWSD tendered bonds for purchase and the settlement date occurs, holders’ bond claims will be reinstated.

If the claims are reinstated, all votes and elections previously delivered will not be counted. Any allowed secured claims for fees, costs and expenses under the bond documents will be paid in full in cash once allowed by the tender order, by agreement of the parties or by court order.

If the tender is not completed and the settlement date does not occur, holders of claims identified as unimpaired will have their claims reinstated, and fees and expenses will be paid in full in cash once allowed.

Meanwhile, holders of DWSD bond claims identified as impaired will receive either new DWSD bonds in a principal amount equal to the amount of bonds held or cash in the full amount of principal and interest due, at the city’s option.

Each holder of impaired DWSD bond claims that accepts the plan can elect to receive new existing-rate DWSD bonds in lieu of the other new bonds.

Interest due as of the distribution date on bonds for which holders receive new bonds will be, at the option of the city, either paid in cash on the first distribution date following the allowance of the bond claim or added to the principal amount of the new bonds.

Revolving sewer and water bond claims will be reinstated.

Regional authority

The amended plan also provides information on a potential regional water and sewer authority that would oversee the system’s operations.

The city said in the sixth amended plan that it may enter into a transaction that includes the formation of a DWSD authority to conduct many or all of the operations currently conducted by DWSD, subject to the approval of incorporating units and numerous other conditions.

Unless waived by the city, Detroit said it would only enter a regional authority transaction if Macomb County, Oakland County and Wayne County and each of their municipal affiliates or related public corporations withdraw with prejudice their objections to confirmation of the plan.

The plan confirmation hearing is scheduled to begin on Sept. 2.

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

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