With creditors threatening preemptive lawsuits to block bankruptcy, Detroit may be closer to filing for Chapter 9 and that filing could come by the end of the month.
Detroit News: “This is push comes to shove week,” a ranking source close to the process said. If bankruptcy is “going to happen, it’s going to happen in July. I don’t think the decision has been made. It’s certainly looming.”
The governor and Emergency Manager Kevyn Orr met Monday to discuss the situation. Additional meetings with creditors, legal teams and the Snyder administration are scheduled this week to determine whether Orr and his team are making enough meaningful progress in their talks with creditors, unions and pension funds to delay a bankruptcy filing.
Waiting carries risks, too. Two lawsuits in Ingham County aiming to block the governor from approving a Detroit bankruptcy are set for a hearing Monday, but a Chapter 9 filing would invoke an automatic stay against lawsuits or actions demanding repayment of debt.
Last month, Orr met with creditors to offer them collectively a $2 billion note in exchange for writing off more than $11 billion in outstanding debt as an alternative settlement to bankruptcy. That deal, according to Orr, works out to a payment of roughly ten cents on the dollar based on the anticipated payout of the city's long-term debt load.
Creditors, including bond holders and the city's pension funds, don't seem eager to take that deal. However, as Orr's spokesman Bill Knowling asks: "it shouldn’t take so long to get to no."
If it enters Chapter 9, Detroit would become the largest city in American history to file for municipal bankruptcy protection.
