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Judge orders Detroit's creditors into closed-door mediation with city

Sep 11, 2014

Gerald Rosen, the bankruptcy judge in charge of mediation, issed the order today.
Credit Detroit Legal News

One big creditor, Syncora, appears to have agreed to a deal with the city this week.

That left one very big fish to fry - the bond insurer Financial Guaranty Insurance Co.

The city owes the group more than $1 billion, and they're not walking away from the money that is owed to them without a fight.

Now the bankruptcy court overseeing Detroit's bankruptcy has ordered FGIC, along with several others, into mediation with the city.

From the order:

It is hereby ordered that, unless otherwise excused by the mediator, the above-named noticed parties shall appear, with counsel and party-representatives with full and complete settlement authority, for continuing mediation on Friday, September 12, 2014, at 10:00 a.m., and continuing day-to-day thereafter as deemed necessary, until released by the mediators…

Robert Snell of the Detroit News reports that FGIC negotiators walked out of talks with the city two weeks ago.

Now, with the Syncora deal close to inked, FGIC is being compelled to try it again.

In a statement Wednesday, FGIC said the firm remains open to a good-faith settlement following the Syncora deal.

“The latest deal reinforces our view that the city has abundant sources of incremental value available ...,” the company said. “However the issue at hand is their willingness to distribute this value fairly and equitably...”

Syncora went from a deal that was going to give the company around 10 cents on the dollar, to a deal that's giving them around 26 cents on the dollar.

Aside from Syncora and FGIC, the other creditors ordered into mediation are:

  • UBS AG
  • SBS Financial Products Co., LLC
  • Merrill Lynch Capital Services, Inc.
  • Ambac Assurance Corp.
  • Black Rock Financial Management
  • Official Committee of Retirees
  • Wilmington Trust Company, National Association, as successor to U.S. Bank National Association, as Trustee and Contract Administrator