Detroit has reached an agreement with debtors about coming out of bankruptcy, and it has happened much sooner than expected. The bond issuer Syncora Guarantee has been the city's fiercest opponent in the past few months in settling these outstanding debts and the two parties have come to a preliminary agreement. Detroit will be giving them control of the Detroit-Windsor tunnel, allowing the company prime waterfront real estate. This could prove lucrative for Syncora, with the NYT stating that $13.5 million in repairs over the first 5 years could return as much as 40%. Detroit is also making many deals with suburban neighbors to repair their aging water and sewer system, which has caused millions in damage.
Detroit is attempting to get out of courts as fast as possible and are making deals with many private companies. Could these deals come back to haunt them in the coming years of recovery, with many deals, like the one with Syncora, lasting until 2040?
http://www.nytimes.com/2014/09/10/us/detroit-clears-crucial-hurdle-on-bankruptcy.html?ref=business&_r=0
Detroit’s bankruptcy is a huge issue. Various negative implications are associated with the city's predicament. The biggest losers as a result of the situation are creditors. Additionally, the bankruptcy will likely increase the borrowing costs for nearby cities as well as cities with problematic finances around the country. Furthermore, while vital services (i.e. police and fire protection) will remain at current levels, the city will still cut other services. Elementary in its simplicity, it is important for Detroit to get out of bankruptcy.
ReplyDeleteI think it's great that Detroit has reached agreements with debtors, as it means that they are on their way to coming out of bankruptcy. However, the fact that they're making multiple deals with private companies in order to speed up the court process could create future issues. It will be interesting to see what ends up happening with these deals, but I agree that the most important thing is that Detroit comes out of bankruptcy.
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