Reuters reports another bankruptcy hurdle in the Detroit bankruptcy case has been overcome as U.S. Bankruptcy Court Judge Steven Rhodes ruled this morning that the court is planning to approve a new settlement deal between Detroit and two investment banks which have been used to hedge interest rate risk on the city’s pension debt.
Under the new agreement the judge will allow Detroit to pay $85 million to UBS AG and Bank of America unit Merrill Lynch Capital Services. His ruling found this amount “reasonable.” This agreement comes on the heels of two earlier swap proposals which the court found unacceptable.
Kevyn Orr worn out by Detroit bankruptcy
In other bankruptcy news, Kevyn Orr, the emergency manager appointed to save the city of Detroit and lead them through Chapter 9 bankruptcy, has declared that he is worn out, and if he had any political ambitions, they are now gone. According to Kevyn Orr, “This [experience] has erased any political aspirations, dead or barely alive, that I ever had, and I was a political science major. This has done me in.”
Why is Orr so burned out? He has tackled what is the largest Chapter 9 municipal bankruptcy ever recorded in United States history. The bankruptcy has been difficult, complicated, filled with negotiations and has lasted over a year.
Orr has by most accounts done a good job and seems to have a good head on his shoulders. Orr claims that his success can be attributed to his ability to deal with irrational behavior, and criticism for no apparent reason. He believes it’s important to do the right thing and be willing to “keep true north.”
Who is Kevyn Orr? Most of us have never heard of him before a year ago. He started his career as a trial attorney in Florida’s Miami-Dade County in the 1980s with aspirations to one day run for political office. Many believe he could be a great candidate with his more than a decade of experience in federal government service and managing Detroit’s bankruptcy.
Why was Kevyn Orr appointed to help Detroit?
When it became apparent that the city of Detroit needed outside help to face their financial crisis, the Michigan Governor Rick Synder appointed Orr to the task. His appointment met with criticism from city leaders, but he held to the task and devised a plan for Detroit. Unfortunately, it became apparent rather quickly that Detroit needed to file bankruptcy to counter the rapid population loss, loss of tax revenue, and their more than $18 billion of debt and liabilities. Detroit filed bankruptcy in July 2013.
Orr has been seen as many as the perfect appointment. Not only is he African American in a city which is predominantly black, he is also a Democrat and the head of the diversity task force at Jones Day. Over the last year Orr has had enormous power to determine the city’s financial future. He has successfully negotiated with some creditors but still is working to negotiate deals with other creditors, which will likely include significant losses for creditors, including pensioners and bondholders.
Orr also noted that this is the last project of this kind he is likely to help with, suggesting in a recent statement that he has “had his fill.” Apparently, however, it hasn’t all been bad. According to Orr, he “really enjoys the financial aspects and restructuring and strategy.”
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