Saturday, September 23, 2023
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Bankrupt Detroit Cuts Deal With Last Holdout

DETROIT (CN) - After months of settlement talks, Detroit may have reached a deal with its last holdout creditor.

Financial Guaranty Insurance Company (FGIC), a bond insurer with a claim for $1.1 billion, has agreed to a deal that would give it 9 acres of land occupied by the Detroit Red Wings' longtime home, the Joe Louis Arena.

The deal will be supplemented with $6 million for demolition from the State of Michigan, two types of notes valued at about $146 million, and about $20 million of "settlement credits" to bid on other city assets, according to the city's lead counsel in the case Corinne Ball, with Jones Day.

Hockey fans can rest assured that the Red Wings have plans in place to move to a new arena in the Cass Corridor. That move is planned for August 2017.

The FGIC plans to use the property to build a hotel, riverfront condominiums and retail shops.

"We are pleased to be able to announce this settlement with the city, which provides FGIC a recovery consistent with other Class 9 creditors," CEO Timothy Travers said in a statement.

"FGIC has always been, and continues to be, believers in Detroit's long-term revival prospects, and this deal gives us the opportunity to participate in and help catalyze that revival."

The agreement must be approved by the City Council and then U.S. Bankruptcy Judge Steven Rhodes. This would allow Detroit early exit from bankruptcy court.

Both parties seem to be optimistic.

"FGIC is happy to be in this position. I anticipate going forward it'll be a mutually beneficial relationship," FGIC attorney Alfredo Perez said.

Detroit is the largest city ever to declare bankruptcy. To save pensions at risk, it entered into negotiation with its major creditors in 2013.

The Detroit News reported that Judge Steven Rhodes has said he anticipates closing arguments in the trial will take place next week.

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