DETROIT: The key hearing on the biggest municipal bankruptcy in US history started on Tuesday in a federal courtroom, where teams of attorneys began laying out arguments over Detroit's plan to adjust $18 billion of its debt. Detroit made history nearly 14 months ago when it filed for bankruptcy.
The confirmation hearing on the city's plan to exit bankruptcy is now scheduled to stretch through Oct. 17.
In a pretrial conference earlier on Tuesday, Gregory Shumaker, a Jones Day attorney representing Detroit, told Judge Steven Rhodes the city may not finish laying out its case until the last week of September or the first week in October.
With Kevyn Orr, Detroit's state-appointed emergency manager, looking on in the courtroom, Jones Day attorney Bruce Bennett began the job of convincing Rhodes that Detroit's 1,034-page plan would save the city.
"There is no doubt, your honor, that progress has been made, but Detroit is still a city in distress," Bennett said in his opening statement.
The plan is aimed at reducing Detroit's debt and obligations by about $7 billion and freeing up millions of dollars to reinvest in the city, according to Bennett.
Detroit has settled with most of its major creditors, including the city's two pension funds, but two insurance companies Syncora Guarantee Inc and Financial Guaranty Insurance Co have emerged as major objectors to the plan.
Both guaranteed payments on $1.4 billion of pension debt the city is seeking to void and both are facing recoveries of just pennies on the dollar.
Earlier on Tuesday, Rhodes said the impact of the plan on any individual creditor is not relevant to the plan's confirmation. If he determines the plan for fixing the city's finances is fair and feasible, Rhodes can impose its terms on hold-out creditors in a practice known as a "cram-down."
But questions have bubbled up in recent weeks about the city's ability to recover from years of fiscal stress, and there remains the possibility that Rhodes could not confirm the plan.
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