Traverse City Record-Eagle

July 18, 2013

Slow talks could hasten Detroit bankruptcy filing

Associated Press

---- — DETROIT (AP) — After several weeks of slow-moving talks, only one deal has been reached between the state-appointed emergency manager hired to fix Detroit’s finances and the more than 50 creditors, two public pension funds and unions jockeying for a piece of the billions of dollars the city owes them.

The slow process is frustrating some creditors who complain the city isn’t doing much to bargain with them beyond offering 10 cents on a dollar. They say bankruptcy attorney Kevyn Orr’s message to them has been a blunt — take it or leave it.

Though Orr has said he’s attempting to avoid the largest municipal bankruptcy in U.S. history, experts say the stalemates at the bargaining tables could push the city in that direction.

“I think Orr is going to get to the point where he has enough ammunition to justify a Chapter 9 if there are enough people not willing to get on the bus,” said James McTevia, a turnaround expert based north of Detroit in Bingham Farms. Bankruptcy may be the only option for a city that for years has crashed toward insolvency, he said.

Orr, who oversaw Chrysler LLC’s bankruptcy and restructuring, briefed the city’s debt holders on June 14 on his plan to erase the city’s $17 billion in debt, warning that time was short and the chance of filing for bankruptcy was about 50-50. He vowed to reassess things from the meeting in 30 days. Since then, he and his team held several meetings with debt holders but few details of those talks have come from Orr’s office.