Emergency Manager takes witness stand in Detroit Bankruptcy Court
6:28 AM, Jan 3, 2014
5:58 PM, Jan 3, 2014
DETROIT (WXYZ) - Detroit Emergency Manager Kevyn Orr is back on the witness stand in Detroit Bankruptcy Court testifying about a "swaps" deal that is being challenged by creditors and pension holders.
Orr testified the complicated deals are "volatile instruments" and a "ticking time bomb" because they had a termination fee.
The "swaps" or loans were first taken out by the Kwame Kilpatrick Administration in 2005 and used to make payments into Detroit City Employee pension systems and they are considered one of the factors that drove Detroit into bankruptcy.
Detroit pledged $180 million a year in revenue from Detroit's three casinos as collateral. Resolving this debt allows the city to have access to that important revenue stream.
Orr and the city negotiated with Wall Street lenders to pay $230 on the swaps which was 80 cents on the dollar owed. Bankruptcy Judge Steven Rhodes struck that down and ordered new talks to get a better deal for the city.
Just before Christmas the new deal was made for the city to pay $165 million, a savings of $65 million.
That was done in mediation with oversight by Chief U.S. District Judge Gerald Rosen.
Creditors and city retirees still maintain the deal is unfair to them as they face reductions in their pensions and health care in bankruptcy.
If the deal is approved, Detroit would borrow $350 million to pay off the $165 million obligation and use the other $120 million to improve city services.
The hearing over the "swaps" will continue on Monday. It is not known when Judge Rhodes will rule on the issue.