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Judge To Decide Today On Detroit's Plan To Exit Bankruptcy

Detroit emergency manager Kevyn Orr, left, speaks at a news conference in Detroit as Michigan Gov. Rick Snyder, who appointed Orr, listens. Orr's plan for the city to emerge from bankruptcy is being heard by a federal judge today.
Paul Sancya AP
Detroit emergency manager Kevyn Orr, left, speaks at a news conference in Detroit as Michigan Gov. Rick Snyder, who appointed Orr, listens. Orr's plan for the city to emerge from bankruptcy is being heard by a federal judge today.

A federal judge is set to rule on a bankruptcy exit strategy for Detroit nearly 16 months after the city asked for protection from its creditors.

At a 1 p.m. ET hearing, Judge Steven Rhodes is expected to read his decision aloud in court and then issue a written ruling expected later.

As WDET's Quinn Klinefelter reports, Rhodes must decide whether the plan to emerge from the nation's largest-ever municipal bankruptcy is fair to creditors and feasible for the city.

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The plan put forward by the Detroit's emergency manager, Kevyn Orr, calls for shedding $7 billion in debt, investing more than $1 billion in city services and borrowing hundreds of millions to implement the overall plan. Detroit has already reached deals with almost all of the creditors that initially opposed the plan, including two bond insurers who agreed to back it in exchange for real estate and a portion of the money they are owed, Quinn reports.

Orr's plan also includes money from the state of Michigan, which has joined private foundations in pledging millions to fund the city's pension system. The plan also would keep the city's valuable art works off the auction block.

As the Detroit Free Press writes, "The only objectors remaining are more than 600 individuals, as well as business contractors and people who sued the city and won settlements before the bankruptcy."

Rhodes potentially could send the plan back for a rework or reject it outright, although that is unlikely.

"I don't think (Rhodes) will throw it all out," James Spiotto, managing director of Chapman Strategic Advisors in Chicago and a municipal bankruptcy expert, was quoted by Reuters as saying. "He might ask for clarification or adjustments."

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Reuters says:

"Court-appointed expert, Martha Kopacz, testified the city's plan is feasible. But she said the relatively fast pace of the city's case may have produced more generous terms for creditors and pushed Detroit "to the skinny end of feasibility." "Kopacz, a senior managing director at Phoenix Management in Boston, also said Detroit was "at the edge" of its ability to repay $275 million the city plans to borrow to finance its exit from bankruptcy."

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