WASHINGTON — Detroit’s recent effort to declare some of its general obligation bonds as unsecured debt faced a strong challenge by public sector unions, but resulted in a judge’s decision to impose a 2 to 3-week negotiation period between bond investors and the city.
Reuters reported that if the city wins the case, then bond insurers will not be paid out by the city.
Detroit, which is the largest municipal bankruptcy in American history, has fallen far from grace and its peak in the 1970s. State-appointed manager Kevyn Orr, who Michigan governor Rick Snyder appointed, is in charge of getting the city out of its deep debt burden.
Unions and their members worry that they will lose portions of their pensions, whose burdensome and increasing cost contributed to the eventual bankruptcy of the city of Detroit.