Detroit Emergency Manager Kevyn Orr's first public appearance discussing the city’s financial problems in a public forum was far from uneventful. The man charged with righting the ship financially for the beleaguered Michigan city reportedly publicly placed the chances of filing for Chapter 9 bankruptcy protection at 50%, all while hundreds of city residents—many retirees or current public workers fearing cuts to pensions, wages or benefits—were locked out of attending because of overcrowding.
Orr, who has extensive bankruptcy experience and represented Chrysler in its well-publicized bankruptcy reorganization, also confirmed he is to meet with representatives from various creditors by week’s end. Detroit is currently in a race against time to cut debt before default and eventual insolvency will essentially force the city into a Chapter 9 filing. Some see it as unavoidable given the deep problems with the falling tax base, as well as retirement and health care costs. Orr reportedly has made it known that he plans to file as early as this summer if some of the city's long-term debt, estimated at a range between $15-17 billion, can't be renegotiated with various creditors.
Bruce Nathan, Esq., of Lowenstein Sandler LLP, predicted at last month’s Credit Congress that, because the value in play and the name-recognition as a first-level U.S. city, a potential Detroit filing would be the biggest newsmaker in Chapter 9 to date. He was among several attorneys at NACM’s annual event who believe the potential for a wave of new municipal bankruptcy filings is growing.
- Brian Shappell, CBA, CICP, NACM staff writer