Detroit emergency manager Kevyn Orr has cancelled a planned bus tour for the city’s Wall Street creditors.
Some of those creditors are in Detroit this week to meet with Orr, and to take a look at some of the city’s assets.
The planned tour would have put the creditors on a city bus, and taken them for some pretty grim sightseeing.
It was meant to convince them that the city’s condition is dire, and bondholders should big accept losses on their Detroit debt.
“The city's creditors informed our office that they would like to spend more time conducting due diligence research into the city's financial state while they are in Detroit,” Orr’s spokesman, Bill Nowling, said in a statement. “It became apparent Tuesday that postponing the tour was necessary."
The tour could be rescheduled, but in the meantime, “Mr. Orr still encourages the city’s creditors to visit and tour the city on their own to see first-hand the issues ordinary Detroiters must deal with each day,” Nowling said. “Restructuring is not just about balance sheets, it’s also about the 700,000 Detroiters who need the city to thrive again.”
But it increasingly seems that the city’s creditors aren’t willing to look much beyond the balance sheet, and take the big hits Orr proposes.
Last week, the city announced it was suing a financial insurer, Syncora.
That company is withholding up to $11 million a month in Detroit’s casino revenues, after the city defaulted on some bonds Syncora insured.
Orr claims Syncora is wrongly withholding that money. He also claims that the move brought negotiations to refinance some debt to a standstill.
And this week, another financial insurer, Ambac, openly resisted Orr’s efforts to treat all the city’s debt-holders equally.
In a statement, Ambac said Orr’s proposal to treat more than $1 billion in general obligation bonds as unsecured debt— and not subject to re-payment — is “harmful to Detroit and the interests of taxpayers in Michigan.”
Noting that general obligation bonds are backed by a city’s “full faith and credit,” Ambac maintains that not putting those bonds first in line for repayment could jeopardize all Michigan cities’ access to credit markets.
So even as talks continue, it appears that Orr’s negotiations with many creditors are hitting a brick wall.
On Tuesday, City Council member Ken Cockrel echoed what many think, that this resistance is speeding up Detroit’s timeline for a possible bankruptcy filing.
“I do think that it’s probably going to be very soon that we’ll know for sure whether or not Chapter 9 [bankruptcy] is in the future,” Cockrel said. “I think he [Orr] was talking about the middle part of August. My personal sense is that it could be sooner than that.”
