Detroit's emergency manager launches key talks with creditors
Detroit’s emergency manager Kevyn Orr sits down with the city’s major creditors Friday.
The meeting sets up negotiations that could help Detroit avoid filing for bankruptcy—or lay the groundwork for it.
Orr will gather all the city’s big creditors—unions, retirees, and banks—to pitch his plan.
They’ll all be asked to take some major losses to help Detroit shed some of its crippling debt load, estimated at a least $15 billion.
Orr’s spokesman, Bill Nowling, says the meeting is also meant to “send an important message.”
“We want to have everyone at the same table," Nowling says. "Banks, bondholders, union members…all the stakeholders. Because we’re going to attempt to treat all classes the same.
“And we want them to be in the same room, to understand that this is not a business, this is a city…and at the end of the day, the city has to be functioning.”
The idea is to convince creditors they’ll get a better deal now than they would if Orr takes Detroit to bankruptcy court.
Michigan State University economist Eric Scorsone says even if Detroit does go there, Orr will still have major power to impose terms on creditors.
“A Chapter 9 bankruptcy very much is in the hands of the city,” says Scorsone. “So in that sense, it’s in the hands of the emergency manager. It’s up to Mr. Orr and his team to lay out an adjustment plan that would help the city.”
Scorsone says that in bankruptcy court, not all creditors are considered equal. Some have better claims than others—but sorting that out can be a long, costly process the city wants to avoid.
Still, it’s unclear how much incentive different creditors have to take steep losses outside court. Details of Orr’s plan will be released after the meeting concludes.
Even if Orr can’t get creditors to agree, the plan could still be used as a template if the city does enter bankruptcy.