Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Emergency manager: Detroit won't pay $2.5B it owes
CBS News ^ | 06/15/2013

Posted on 06/16/2013 8:36:00 AM PDT by SeekAndFind

A team led by a state-appointed emergency manager said Friday that Detroit is defaulting on about $2.5 billion in unsecured debt and is asking creditors to take about 10 cents on the dollar of what the city owes them.

Kevyn Orr spent two hours with about 180 bond insurers, pension trustees, union representatives and other creditors in a move to avoid what bankruptcy experts have said would be the largest municipal bankruptcy in U.S. history.

Underfunded pension claims likely would get less than the 10 cents on the dollar.

An assessment of the plan's progress will come in the next 30 days or so.

Orr also announced that Detroit stopped paying on its unsecured debt Friday to "conserve cash" for police, fire and other services in the city of 700,000 people. The debt not being paid includes $39 million owed to a certificate of participation.

"We will not pay that today," Orr told reporters after the meeting with creditors at a hotel at Detroit Metropolitan Airport in Romulus.

More than 42 percent of Detroit's 2013 revenue went to required bond, pension, health care and other payments. If the city continues operating the way it did before Orr arrived, those costs would take up nearly 65 percent of city spending by 2017, Orr's team said.

The team also said the proposal presented Friday is the one shot to permanently fix fiscal problems that have made the city insolvent.

Orr said everyone involved needs to come to grips with Detroit's dire financial situation that has been worsened by years of procrastination and denial. He said his team is prepared for potential lawsuits from creditors not pleased with the arrangements under the plan.

(Excerpt) Read more at cbsnews.com ...


TOPICS: Business/Economy; Government; News/Current Events; US: Michigan
KEYWORDS: bankruptcy; debt; detroit

1 posted on 06/16/2013 8:36:00 AM PDT by SeekAndFind
[ Post Reply | Private Reply | View Replies]

To: SeekAndFind
DETROIT EMERGENCY MANAGER, KEVYN ORR

2 posted on 06/16/2013 8:37:32 AM PDT by SeekAndFind
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

I wonder if anybody has the fantasy that Chicago will pay what it owes, or St Louis, LA, Philly.....

Sorry kids but the only other options are federal bailouts.


3 posted on 06/16/2013 8:38:44 AM PDT by cripplecreek (REMEMBER THE RIVER RAISIN!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

wow shocked NOT


4 posted on 06/16/2013 8:42:10 AM PDT by yldstrk (My heroes have always been cowboys)
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

And the public employee pension fund managers were given a heads up on this decision weeks ago with just enough time to unload these bonds before today’s announcement.


5 posted on 06/16/2013 8:43:35 AM PDT by Uncle Chip
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind
The team also said the proposal presented Friday is the one shot to permanently fix fiscal problems that have made the city insolvent.

Uh-Huh

Bet getting people to invest in new bonds is gonna be impossible.

6 posted on 06/16/2013 8:45:06 AM PDT by Vinnie
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

Maybe I’ll try that with my creditors. “Sorry guys. I’ve decided that even though I owe you the money, I’ve decided I’m not going to pay”. Wonder how that’ll work out for me. LOL! Now, if I was a registered demokkkrat it’d probably be just fine.


7 posted on 06/16/2013 8:47:20 AM PDT by rktman (Inergalactic background checks? King hussein should be first up.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

So... what happens when Zero asks China to accept ten cents on the dollar in exchange for our Chinese debt?


8 posted on 06/16/2013 8:48:01 AM PDT by moovova
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

Just following the lead of Der Dufus.


9 posted on 06/16/2013 8:48:03 AM PDT by unixfox (Abolish Slavery, Repeal The 16th Amendment!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

What sort of imbecile would lend money to Detroit?


10 posted on 06/16/2013 8:48:35 AM PDT by oblomov
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind
You would think that all mayors, city council members, city managers for the last fifty years would be charged with gross negligence and sued for every penny they have.
Not legal?

Okay how about the city would be required to purchase an insurance policy to insure they can cover their liabilities.
The insurance company could then audit and evaluate the cities current operation and charge a premium based on that evaluation.

11 posted on 06/16/2013 8:49:45 AM PDT by oldbrowser (We have a rogue government in Washington)
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind
Emergency manager: Detroit won't pay $2.5B it owes

OK

FMCDH(BITS)

12 posted on 06/16/2013 8:50:37 AM PDT by nothingnew (I fear for my Republic due to marxist influence in our government. Open eyes/see)
[ Post Reply | Private Reply | To 1 | View Replies]

To: rktman

It’s the old adage: If I owe you a thousand dollars I can’t pay, I’m screwed. If I owe you a billion dollars and can’t pay, you’re screwed.


13 posted on 06/16/2013 8:54:26 AM PDT by Cyber Liberty (I am a dissident. Will you join me? My name is John....)
[ Post Reply | Private Reply | To 7 | View Replies]

To: Uncle Chip
Did you catch this part? "Underfunded pension claims likely would get less than the 10 cents on the dollar"

Too soon to tell, but this may turn out differently from the GM bailout, with unions and their pension funds taking a good part of the hit.

It would be nice if the emergency manager used the bankruptcy to cancel the union contracts.

14 posted on 06/16/2013 8:55:42 AM PDT by PapaBear3625 (You don't notice it's a police state until the police come for you.)
[ Post Reply | Private Reply | To 5 | View Replies]

To: SeekAndFind

Call it a “comprehensive” plan, Kevyn, and it’s all good.
Or maybe declare Motown a ‘creditor-free’ zone?


15 posted on 06/16/2013 8:56:26 AM PDT by tumblindice (America's founding fathers: All armed conservatives.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: oblomov

RE: What sort of imbecile would lend money to Detroit?

Those who think the bond is “safe” because the Feds will come in to bail the city out... WE SHALL SEE...


16 posted on 06/16/2013 8:56:46 AM PDT by SeekAndFind
[ Post Reply | Private Reply | To 10 | View Replies]

To: tumblindice
As I said on an earlier thread about this situation, the proper solution would be to legally dissolve the city of Detroit -- dis-incorporate it -- and liquidate the city's assets to satisfy its creditors.

Then new, smaller communities would incorporate in Wayne County consisting of various parts of the former Detroit. These communities would be viable and could start all over again.

This model could then be used when other cities, such as Philadelphia, collapse.

17 posted on 06/16/2013 9:01:24 AM PDT by Publius
[ Post Reply | Private Reply | To 15 | View Replies]

To: SeekAndFind

Where’s that Obama Money????LOL


18 posted on 06/16/2013 9:05:47 AM PDT by phockthis (http://www.supremelaw.org/fedzone11/index.htm ...)
[ Post Reply | Private Reply | To 1 | View Replies]

To: cripplecreek
Sorry kids but the only other options are federal bailouts.

I have no doubt the idea of feral government bail-outs of Democratic [sic] party bankrupt cities will be raised; I have even less doubt the rest of the nation is not going to be willing to pick up the tab for the looters. That idea could—and should—lead to secession.

19 posted on 06/16/2013 9:06:03 AM PDT by Standing Wolf
[ Post Reply | Private Reply | To 3 | View Replies]

To: SeekAndFind

I hope the unions invested heavily in that debt. It’d be a win-win!


20 posted on 06/16/2013 9:06:32 AM PDT by SgtHooper (The last thing I want to do is hurt you. But it's still on the list.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

Why did the Democrats in Detroit keep electing Democrat politicians? Was it because they thought that the Democrat politicians would get the most efficient and effective use out of the taxpayer’s hard-earned dollars? Or did the Democrat voters of Detroit keep electing Democrat politicians because the voters thought the politicians would steal hard-earned tax dollars for them? If this is the case, then that makes the Democrat voters accomplices to the crimes. Treat them like all criminal accomplices. Fine them to pay for the horrible results of their crimes. If they can’t pay, then they lose their vote.


21 posted on 06/16/2013 9:09:18 AM PDT by blueunicorn6 ("A crack shot and a good dancer")
[ Post Reply | Private Reply | To 1 | View Replies]

To: oldbrowser
Okay how about the city would be required to purchase an insurance policy to insure they can cover their liabilities. The insurance company could then audit and evaluate the cities current operation and charge a premium based on that evaluation.

That can already be done - credit default swaps. Unfortunately, though, the exposure through CDS and derivative markets is hundreds of trillions of dollars and no firm on earth could cover the swaps that they back - ironic isn't it?

22 posted on 06/16/2013 9:20:14 AM PDT by RobertClark (My shrink just killed himself - he blamed me in his note!)
[ Post Reply | Private Reply | To 11 | View Replies]

To: SeekAndFind

Detroit Municipal UNSECURED debt - talk about junk bonds!

Given the politics and economy of Detroit, as well as the third-world socialist thinking of the Obama Administration, I couldn’t imagine Detroit’s secured debt as being worth very much either.


23 posted on 06/16/2013 9:21:07 AM PDT by PGR88
[ Post Reply | Private Reply | To 1 | View Replies]

To: blueunicorn6

The rats elected rats for two reasons -

Racial preferences and the party of free stuff that was going to make the productive pay their fair share - inevitably the productive fled the city.

By the way - 2.5B is insignificant when you kick around the money everyone owes thanks to Uncle Sugar. The most important lesson of Detroit is how it illustrates the inevitable ending for our entire nation based on big government redistribution schemes.


24 posted on 06/16/2013 9:23:45 AM PDT by volunbeer (We must embrace austerity or austerity will embrace us)
[ Post Reply | Private Reply | To 21 | View Replies]

To: SeekAndFind

The inevitable result of liberalism.


25 posted on 06/16/2013 9:24:17 AM PDT by Blood of Tyrants (Inside every liberal and WOD defender is a totalitarian screaming to get out.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: rktman
Maybe I’ll try that with my creditors. “Sorry guys. I’ve decided that even though I owe you the money, I’ve decided I’m not going to pay”. Wonder how that’ll work out for me.

The difference is that you have something worth repossessing. Who would want what's left of Detroit?

26 posted on 06/16/2013 9:27:42 AM PDT by Fresh Wind (The last remnants of the Old Republic have been swept away.)
[ Post Reply | Private Reply | To 7 | View Replies]

To: Uncle Chip

Who would buy them and at what price?


27 posted on 06/16/2013 9:28:55 AM PDT by count-your-change (you don't have to be brilliant, not being stupid is enough)
[ Post Reply | Private Reply | To 5 | View Replies]

To: PGR88

Obama rescue bailout in 3....2....1.....


28 posted on 06/16/2013 9:29:52 AM PDT by nascarnation (Baraq's economic policy: trickle up poverty)
[ Post Reply | Private Reply | To 23 | View Replies]

To: RobertClark
That can already be done - credit default swaps. Unfortunately, though, the exposure through CDS and derivative markets is hundreds of trillions of dollars and no firm on earth could cover the swaps that they back - ironic isn't it?

Credit default swaps are not legit exactly for the that reason. I am talking about a legitimate insurance company with resources to cover it's policies and the expertise to underwrite a city and evaluate their operations on an ongoing basis.

29 posted on 06/16/2013 9:30:01 AM PDT by oldbrowser (We have a rogue government in Washington)
[ Post Reply | Private Reply | To 22 | View Replies]

To: oblomov

Yes that is my question too. Anyone lending money to Detroit
certainly in the last 10-15 years should have been aware of the risks.


30 posted on 06/16/2013 9:31:59 AM PDT by Maine Mariner
[ Post Reply | Private Reply | To 10 | View Replies]

To: Uncle Chip

If true, that would be criminal, and every buyer of bonds dumped under those circumstances would have a cause of action. Per my admittedly sketchy layman’s understanding. So ... has that been confirmed?


31 posted on 06/16/2013 9:33:52 AM PDT by sphinx
[ Post Reply | Private Reply | To 5 | View Replies]

To: oldbrowser
Credit default swaps are not legit exactly for the that reason. I am talking about a legitimate insurance company with resources to cover it's policies and the expertise to underwrite a city and evaluate their operations on an ongoing basis.

I would love to see that. Of course, certain legal requirements like ownership of the underlying security would present a bit of a problem in the traditional insurance context. It would be nice to see a town or a state buck the trend and find a way to legitimately make this happen (Texas, are you listening?). Other than on a limited basis, could you imagine the capital reserves that would be required for a wholesale across the board coverage? Even on a traditional reserve basis, the reserves required could exceed $600 trillion. The scale of debt at all levels is staggering, really.

32 posted on 06/16/2013 9:34:32 AM PDT by RobertClark (My shrink just killed himself - he blamed me in his note!)
[ Post Reply | Private Reply | To 29 | View Replies]

To: cripplecreek

>>Sorry kids but the only other options are federal bailouts...

It needs to be explicitly said that this would just represent more kicking the can down the road.


33 posted on 06/16/2013 9:40:03 AM PDT by FreedomPoster (Islam delenda est)
[ Post Reply | Private Reply | To 3 | View Replies]

To: nascarnation
Obama rescue bailout in 3....2....1.....

No doubt places like Detroit will get rescue bailouts, but only after Obama takes the opportunity to stick it to private investors and any politically un-connected financial firms. Think GM bailout.

34 posted on 06/16/2013 9:43:53 AM PDT by PGR88
[ Post Reply | Private Reply | To 28 | View Replies]

To: SeekAndFind
This is the tip of the iceberg. Two comments.

(1) In Cyprus, the failed bank's creditors were only required to take an 80% haircut. Detroit is asking creditors to take a 90% haircut. This will not fly. The litigation will be monumental and shake all of government to the core.

(2) The credit/bond rating agencies have changed the standard by which pension obligations must be accounted for. A huge number of state, local and unions (and corporations) are going to find themselves so far underwater that there is going to be a run on the Pension Benefit Guaranty Corp. That will be the bailout of all bailouts.

“...The pension changes from Moody’s, and separately the Governmental Accounting Standards Board, scheduled for this month, could result in Los Angeles, San Francisco, San Jose, Azusa and Inglewood joining fiscally troubled Stockton and San Bernardino, among others, as severe credit risks. It's all largely due to soaring employee retirement costs...”

http://www.foxbusiness.com/government/2013/06/11/california-on-brink-pension-crisis/#ixzz2WOjpWwzJ

35 posted on 06/16/2013 9:44:04 AM PDT by Robert357 (D.Rather "Hoist with his own petard!" www.freerepublic.com/focus/f-news/1223916/posts)
[ Post Reply | Private Reply | To 1 | View Replies]

To: cripplecreek
CC, you know there is another option. How much is the DIA's collection worth? I have heard as much as $50 Billion. How much is Belle Isle worth? The water department?

Detroit has plenty of assets. Sell them off, pay the creditors.

36 posted on 06/16/2013 9:47:06 AM PDT by Former Proud Canadian (The IRS--a softer Gestapo)
[ Post Reply | Private Reply | To 3 | View Replies]

To: FreedomPoster

Bailouts are exactly what many cities (and their creditors) expect in their future.

The Detroit situation sucks but what is coming to the rest of the nation will be far worse.


37 posted on 06/16/2013 9:48:21 AM PDT by cripplecreek (REMEMBER THE RIVER RAISIN!)
[ Post Reply | Private Reply | To 33 | View Replies]

To: SeekAndFind

If I was a creditor of Detroit I wouldn’t let them buy one damned thing without cash.Its cash or go fry ice.

Detroit has proven it can’t manage its own financial affairs.


38 posted on 06/16/2013 9:49:59 AM PDT by puppypusher (The World is going to the dogs.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: RobertClark
Even on a traditional reserve basis, the reserves required could exceed $600 trillion. The scale of debt at all levels is staggering, really.

You're right. Even factoring in the presence of a watchdog insurance company keeping reckless politicians in check, the vagaries of economies or unexpected calamities would make insurance too expensive.
But we still end up having to pay that price under the current system, so there must be a way.

39 posted on 06/16/2013 9:57:19 AM PDT by oldbrowser (We have a rogue government in Washington)
[ Post Reply | Private Reply | To 32 | View Replies]

To: Publius

They failed. Put them in receivership & auction off any assets to viable munipalities. A bail-out is good money after bad management.
But progressive thinking is to reward bad behavior, so they will be propped up and bleed red ink for a few more years.


40 posted on 06/16/2013 11:17:55 AM PDT by tumblindice (America's founding fathers: All armed conservatives.)
[ Post Reply | Private Reply | To 17 | View Replies]

To: Robert357

nice post
seems correct
thank you


41 posted on 06/16/2013 11:21:59 AM PDT by genghis
[ Post Reply | Private Reply | To 35 | View Replies]

To: Former Proud Canadian

nice advice
it is going to be interesting


42 posted on 06/16/2013 11:22:44 AM PDT by genghis
[ Post Reply | Private Reply | To 36 | View Replies]

To: moovova

QE is taking care of that.


43 posted on 06/16/2013 11:38:17 AM PDT by 867V309
[ Post Reply | Private Reply | To 8 | View Replies]

To: SeekAndFind

The best thing the creditors can do is to stop doing business with a deadbeat. When they can no longer hire any contractors they might get a clue.


44 posted on 06/16/2013 11:53:47 AM PDT by GeronL (http://asspos.blogspot.com)
[ Post Reply | Private Reply | To 1 | View Replies]

To: moovova

That is easy, we have to inflate the currency to make a dollar then worth a dime now.


45 posted on 06/16/2013 11:54:37 AM PDT by GeronL (http://asspos.blogspot.com)
[ Post Reply | Private Reply | To 8 | View Replies]

To: rktman

Its called bankruptcy and happens everyday in the US. If there is no money, they can’t pay and that is not going to change.


46 posted on 06/16/2013 12:43:03 PM PDT by packrat35 (Admit it! We are almost ready to be called a police state!)
[ Post Reply | Private Reply | To 7 | View Replies]

To: SeekAndFind

This is simply a desperate attempt to avoid formal bankruptcy in an effort to preserve union contracts. In a formal bankruptcy, union contracts could be abrogated, and the bankruptcy trustees would be in a a very awkward spot if they chose to screw everyone BUT the unions.


47 posted on 06/16/2013 2:30:31 PM PDT by catnipman (Cat Nipman: Vote Republican in 2012 and only be called racist one more time!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

The unsecured creditors should put Detroit into an involuntary bankruptcy and have a court appointed administrator assemble a creditors committee to administer the city’s assets and revenue. The first step would be to send the City council home. Step two a full audit to examine revenues and root out corruption


48 posted on 06/16/2013 2:30:58 PM PDT by Jimmy Valentine (DemocRATS - when they speak, they lie; when they are silent, they are stealing the American Dream)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Robert357
The credit/bond rating agencies have changed the standard by which pension obligations must be accounted for. A huge number of state, local and unions (and corporations) are going to find themselves so far underwater that there is going to be a run on the Pension Benefit Guaranty Corp. That will be the bailout of all bailouts.

As they say in England, no worries, mate!

The Fed will just print the money. To maintain stability in the markets, of course. And, yeah, food will go up another 5% and gas prices will rise but they're not counted in the CPI [too volatile] so the effect will be nil.

49 posted on 06/16/2013 4:24:24 PM PDT by BfloGuy (Don't try to explain yourself to liberals; you're not the jackass-whisperer.)
[ Post Reply | Private Reply | To 35 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson