Detroit inches closer to leaving bankruptcy behind as the city’s plan to get out of debt seems to be finally coming to fruition. Syncora Guarantee had such objections to the city’s debt plan that the company threatened to lock Detroit in litigation for months, however, they have now agreed to work with city officials on the matter.
Deal with Outspoken Opposition to Bankruptcy Plan
The trial with Syncora began September 2. When the deal was announced on September 9, the trial was put on pause so the company and the city could work out logistics. Detroit will pay back 26% of what the company is owed and give the company investment opportunities in the city. The deal may shorten the time the city spends in court and quicken the implementation of the city plan.
Syncora has hundreds of millions of dollars in Detroit, including lease of the Detroit-Windsor Tunnel. The city agreed to give the company lease of the tunnel until 2040 and ownership of property around the tunnel that could be used for riverfront development. Detroit will also give the company a 30-year lease of a parking garage for $13.5 million in repairs over 5 years. Detroit would benefit from improvement efforts and the company would make 40% more money on the parking garage than it paid out to the city.
Detroit was previously offering creditors 10 cents on every dollar. Many industries in the city felt the bankruptcy plan was unfair since high investors had a higher rate of loss than did other creditors, such as city workers.
Capitalizing on Detroit’s Major Asset
In September, Detroit reached another deal that may begin removing obstacles to their bankruptcy. Detroit and some suburbs will lease water and sewer lines to the newly formed Great Lakes Water Authority. Over 40 years, Detroit would receive $50 million a year to update and replace current lines.
The current lines are an asset to the city but some parts have fallen to disrepair due to the declining financial state of Detroit. Some pipes have even caused sinkholes in the city due to unrepaired damages.
Detroit and the nearby counties will work together to run the new Water Authority and charge customers as they agree upon. Over 40% of Michigan’s total population is expected to receive water and sewer services in this deal. As part of the $50 million, $4.5 million is allotted to help residents struggling to make payments on their water bills.
Detroit borrowed money in order to provide services to residents of the city, which now stands at less than 700,000 people. By restructuring and providing investment opportunities to creditors, the city stands a chance to work its way out of debt.