{"id":5498,"date":"2013-07-18T00:00:00","date_gmt":"2013-07-18T05:00:00","guid":{"rendered":"https:\/\/institutionalinvestorsecuritiesblog.blawgcloud.com\/2013\/07\/detroit_becomes_largest_us_cit"},"modified":"2022-05-05T08:34:16","modified_gmt":"2022-05-05T13:34:16","slug":"detroit-becomes-largest-us-cit","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/detroit-becomes-largest-us-cit\/","title":{"rendered":"Detroit Becomes Largest US City to File Bankruptcy Protection"},"content":{"rendered":"

In what is now the country\u2019s largest public bankruptcy, the city of Detroit has filed for Chapter 9 bankruptcy. Michigan Governor Rick Snyder, who filed for the protection along with Emergency Manager Kevyn Orr, said that that there was no other alternative.<\/p>\n

Investors who purchased securities issued by the city of Detroit at the recommendation of a financial advisor may have a claim to recover some or all of their losses. Please contact our securities fraud law firm<\/a> to request your free case assessment. <\/p>\n

At a joint news conference held by the two men, Snyder spoke about the need to bring to a halt to the city\u2019s 60-year decline. He noted that 38% of Detroit\u2019s budget is going to debt service, pensions, and other \u201clegacy costs.\u201d He also said 40% of street lights don\u2019t work and, unlike the police response time national average of 11 minutes, the city\u2019s police take nearly an hour to show up.<\/p>\n

Detroit\u2019s total liabilities are about $18 billion. Orr has already stopped paying about $2 billion of the city\u2019s debt. His reorganization plan involves reducing $11.5 billion in debt to $2 billion, with retirees and investors getting just 17% of what is due to them. <\/p>\n

According to CNN, public employee unions are expected to oppose the filing. They contend that Detroit did not exhibit good faith negotiation and it should not be able to get out of commitments it made to retirees and employees. <\/p>\n

Needless to say, city employees and retirees won\u2019t be happy if any of their pension benefits are cut. While the Pension Benefit Guarantee Corp. will usually intervene to offer minimum benefits when employees of a business that has gone bankrupt lose the pensions promised to them, the federal agency isn\u2019t responsible for pensions in the public sector.<\/p>\n

Deals are also in the works for the city to potentially pay bond holders Bank of America (BAC) and Merrill Lynch (MER) 75 cents on the dollar\u2014that\u2019s close to $340 million in secured debt, report some sources. <\/p>\n

The Wall Street Journal says that per media reports and public filings, while it is not known at this time which of the city\u2019s assets would have to be sold, possible contenders include a Van Gogh painting, the Detroit Zoo, Fort Wayne, or even all its assets. <\/p>\n

Orr plans for the bankruptcy to be completed by the \u201csummer or fall\u201d of 2013. The process could cost Detroit hundreds of million dollars in financial and legal expenses.<\/p>\n

Detroit\u2019s bankruptcy filing will likely cause reverberations. Bankruptcies could make it harder for towns and cities to raise the funds to construct schools, bridges, and other infrastructures. Individual investor-held municipal bonds could also take a hit.<\/p>\n

Chapter 9 Bankruptcy<\/strong>
\nPer the US Courts website, Chapter 9 bankruptcy protection is for municipalities. It enables them to come up with a plan so they can deal with their debts. It is up to a city or its to decide whether to liquidate its assets. <\/p>\n

Detroit files for Chapter 9 bankruptcy protection, My Fox Detroit, July 18, 2013<\/p>\n

Detroit’s bankruptcy could spell good-bye for Howdy Doody<\/a>, CNN, July 19, 2013 <\/p>\n

\nMore Blog Posts:<\/strong>
\nUBS, Morgan Stanley, Merrill Lynch, and Other Brokerage Firms Subpoenaed by Massachusetts Securities Regulator in Probe of Complex Investments Sold to Seniors<\/a>, Stockbroker Fraud Blog, July 8, 2013 <\/p>\n

New Hampshire Investment Adviser Focus Capital Wealth Management Accused of Elder Financial Fraud to Pay Exchange Traded Fund Victims $2.4M<\/a>, Stockbroker Fraud Blog, March 14, 2013 <\/p>\n

The 21st Century Glass-Steagall Act Seeks to Separate Investment and Commercial Banking Again<\/a>, Institutional Investor Securities Blog, July 12, 2013 <\/p>\n

Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

In what is now the country\u2019s largest public bankruptcy, the city of Detroit has filed for Chapter 9 bankruptcy. Michigan Governor Rick Snyder, who filed for the protection along with Emergency Manager Kevyn Orr, said that that there was no other alternative. 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