In a move that should not be overlooked, bond insurer Syncora is complaining that the mediators of the Grand Bargain, a Federal judge and a former DIA trustee, were biased toward specific creditors which violates the principal of treating all equally situated creditors equally. Although the Grand Bargain seemed to be a lock once Detroit’s pensioners voted to accept its terms, the bond insurer’s suit will be the last gasp of opposition:
As one example, Syncora cited remarks that Judge Rosen made at a news conference earlier this year, describing efforts to keep the treasures of the Detroit Institute of Arts from being sold to pay the city’s creditors.
“None of this would be possible without all of us keeping a clear vision firmly in mind about who this is really about,” Judge Rosen said. “It’s about Detroit’s retirees, who have given decades and decades of their lives, devoted to Detroit.”
With Detroit scheduled to seek approval of its plan for emerging from bankruptcy later this month, Syncora’s objection offered a preview of some of the issues likely to be thrashed out in court. Judge Rhodes must ultimately decide whether the plan meets certain fundamental criteria — whether it is in the best interests of the creditors, for instance, whether it is feasible and whether it treats equally situated creditors roughly the same.
Syncora said Detroit’s plan failed the tests because it singled out a favored group of creditors — the city’s retired workers — and funneled “every dime” of available resources to them “at the exclusion of all other creditors of equal rank.”
“The court must reject the plan to preserve the integrity of judicial and mediation processes,” Syncora said in its objection.