Detroit Eligible To File Chapter 9; Pension Haircuts Allowed Bankruptcy Judge Rules

Tyler Durden's picture

Update, and it's official: 

  • JUDGE: DETROIT ELIGIBLE FOR IMMEDIATE BANKRUPTCY PROTECTION
  • DETROIT TO REMAIN UNDER BANKRUPTCY COURT PROTECTION, JUDGE SAYS

As somewhat expected - though hoped against by many Detroit union workers - Judge Steven Rhodes appears to have confirmed Detroit is eligible for bankruptcy protection (after pointing out that the city's accounting was accurate and it is indeed insolvent) making this the largest ever muni bankruptcy.

  • JUDGE RHODES SAYS HE WILL ALLOW PENSION CUTS IN DETROIT'S BANKRUPTCY
  • DETROIT JUDGE: NOTHING SEPARATES PENSIONS FROM OTHER DEBT

The city will now begin working toward its next major move - the submission of a plan to re-adjust its more than $18 billion in debt - including significant haircuts for pension funds (possibly 16c on the dollar recovery) and bondholders. With Detroit as precedent, we can only imagine the torrent of other cities in trouble that will be willing to fold.

He did provide an "out" though:

  • RHODES WARNS THE CITY THAT JUST BECAUSE PENSION RIGHTS CAN BE IMPAIRED, DOESN'T MEAN HE WILL APPROVE A PLAN WITH STEEP CUTS

Via Bloomberg,

Before the bankruptcy, Orr proposed canceling $3.5 billion in future pension obligations and at least $1.4 billion in unsecured bonds. The debts would be replaced with a $2 billion note paying 1.5 percent interest.

But, of course:

Detroit must ask “what is necessary to invest to attract business?” Spiotto said in a phone interview. “If you don’t solve the systemic problem, you are just going to repeat it.”

Summary from Reuters:

Detroit is eligible for the biggest municipal bankruptcy in U.S. history because the city is broke and without Chapter 9 bankruptcy would continue on the path that has led it to insolvency, a federal judge ruled on Tuesday.

 

The judge also ruled that while the city did not negotiate in "good faith" with creditors, there were too many of them to make such negotiations practical.

 

Appeals are expected, but the ruling by U.S. Judge Steven Rhodes sets the stage for Detroit to file a plan of financial readjustment by March 1. The city's attorneys said they were not sure if the filing would occur before the end of the year.

 

The ruling came 25 days after the end of an eligibility trial during which Detroit's labor unions, retirees and pension funds argued against the city's July 18 bankruptcy filing.

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madcows's picture

but, but but... they paid in!

Groundhog Day's picture

I wish i had a list of every police officer and firefighter so i cound send them this news.  The Banksters they will eventually protect are the same that allowed this to happen

kaiserhoff's picture

Calipornia, here it comes;)

Jumbotron's picture

That's 16 cents on the dollar in TODAY'S BERNANKE FIAT VALUE.

It will be 12 cents next year.

And then 7

then 2........then.....

ZERO hedge.

TruthInSunshine's picture

"With Detroit as precedent, we can only imagine the torrent of other cities in GRAVE FINANCIAL trouble, THAT LACK THE RESOURCES TO COVER EVEN 1/2 TO 1/3 OF THEIR 'PAST FINANCIAL PROMISES,' that will be EAGER to fold."

Fixed that for 'ya.

kushmere's picture

As if the screams of a thousand welfare babies cried out, and were suddenly silenced...

 

http://bestbitcoinsites.wordpress.com

AlaricBalth's picture

“As clear as it is important, the death of Detroit is still mostly ignored. Generally, the slow destruction of a major city would get a fair amount of attention, but the lack of coverage is hardly surprising. After all, the “bad guys” aren’t the popular ones. In most circles, condemning taxation, regulation, unionization, welfarism and protectionism is unfashionable. It’s necessary to check political correctness at the door and appreciate that the case of Detroit isn’t an isolated tragedy. What happened in Detroit could be coming to a city near you.” 
Dan GreenupThe Death of Detroit

KnightTakesKing's picture

In Detroit, there are no peas. Just feral dogs. Hedge accordingly.

The Big Ching-aso's picture

Ok no peas so eat your pit bulls?

Four chan's picture

i live in the city, in the hood and jf everyones info the banks are done already,

they signed off on 75 cents on the dollar, this happened 5 months ago.

lol those bankers who wrecked america are so smart. 

knukles's picture

This is the CA Progressive Governmental Employees Worst Nightmare.
They've proselytized for years that if the cities/counties go bankrupt then they still get their pensions and the bondholders take all the hit.

This is landmark for the relationship between Federal Bankruptcy Code and alternatives.

It will be fought tooth and nail... nuclear outcome with the investment managers, insurance companies on one side and public pensions on the other.

We all know the Public's Opinion of "Fuck the government over paid under-worked arrogant leeches"

kralizec's picture

If you like your pension you can keep....(laughing)...OK, fuck you serf!

xxxoooxxx

-Hopey/Changey

James_Cole's picture

George Carlin had a sensible quote on this, "They're coming after your fucking pensions and they're gunna get them too!"

The man was indeed clairvoyant.

Dan Conway's picture

Good post knukles!  Don't forget that the very same totally-broke state pension plans are some of the biggest owners of the worthless debt and investors in venture capital and private equity funds.  Most people don't realize that the pension plans are sitting on both sides of the table - on one side are the paid investment managers that have a vested interest in keeping the good times going.  On the other side are the overseers (political appointees) that have bosses (politicians) that have a vested interest in buying votes from government employees.  So who represents the taxpayers?  And why don't the union leaders protect the interests of their rank-and-file members that are the ones that will get royally screwed when all of these plans fail?  These are rhetorical questions because we already knew this was going to happen.  It just sucks waiting for the sheeple to catch up. 

spaceduck's picture

So today is your "double POMO day".

"double pomo don't sell in this day" day.

 

what a joke 

TruthInSunshine's picture

Billary Clinton, with the eye on the 2016 prize, just released the following statement:

"We hereby demand that President Obama issue an Executive Order, nullifying the judicial branch as one of the 3 separate U.S. Branches of government as guaranteed under the relic some refer to as 'the Constitution,' and furthermore, order Ben Shalom Bernanke or Janet Yellen (his better hung successor in waiting) to deposit a one trillion USD denominated platinum coin into the coffers of the City of Detroit Treasury Department, c/o Union Cronies, forthwith."

-- Sincerely, Hillary '2016' Clintonlingus

RSloane's picture

There are now two other cities in California that are exploring the possibilities of declaring bankruptcy. Salaries of current public employees as well as public employee pension obligations are cited as two of the problems facing these cities. No one, not one person, has suggested that the politicians who made those contracts should be held liable. Politicians will continue to make very bad employment contracts because not one of them has ever been held accountable. Its so damn frustrating.

Meat Hammer's picture

I keep telling my California state-worker, blue-team voting, teat-sucking sheeple acquaintances that they will be the first ones to receive the rectal fisting when it all collapses and they refuse to believe me.  They ask why would they be the ones to get screwed when they voted for the people who would be ultimately trying to fix the collapse that they.......created.....with the power given to them by the voters........., whom, if they voted for the problem-creators then they also should make sacrifices and be a part of the..........solutions.......oh........wait..........FUCK!

The true believers are always the first ones to go to the gallows.

willwork4food's picture

Yup. Expect more cities and towns that you've never heard of.

TruthInSunshine's picture

Wasted away again in Unionitaville,
Searchin' for my heavily at risk and dwindling (soon to be lost) pension/DRIP/401(k)/other retirement stockpile.
Some people claim that there's vast graft, corruption, criminality, a massively bloated public sector worker base & Federal Reserve enabled banksters that prey on desperate & idiotic borrowers to blame,
But I know it's nobody's fault (and those unproductive days for decades while on the city dole taking 3 to 4 hour naps at our desks or in idling, heated or A/C on full blast F150s/Crown Victorias/Explorers, etc. were soooo worth it).

ElvisDog's picture

Another common theme among my SF Bay Area progressive friends is that if something is "mandated" it will happen. They get really mad when I say "you can mandate anything you want, but if there is no money..."

Jena's picture

Right, their stock replies are "The taxpayers will fill in the short fall" and (their most frequently used) "We just need to tax the rich more!"

Morons.

Freddie's picture

LOL!  They get mad when you remind them about reality. 

Freddie's picture

Chicago's pensions are in bad shape as well.  I hope it happens there.  I have a relative with a Chi Town retiree neighbor down the street that is probably fire.   Total psycho hubby and wife.  Living high on the pension hog.   Nasty people.

max2205's picture

I just saw 1, 000 firetrucks and police cars leave Detroit for Texas.....

Vampyroteuthis infernalis's picture

Those junkers would break down before they got to the Texas border. Stay home Yankee!

Blano's picture

Sorry buddy.....my Ford F-150 with over 210,000 miles made it to Dallas in one piece.  Damn happy to be here too.

youngman's picture

The peple that live in Detroit are not Yankees......they hyphinate their name...with their other continent

Bawneee Fwank's picture

All you carpetbagging motherfuckers stay up there and reap what you sow!  We dont want your pussy liberal ass down here!  All you dumbass shit stains come down here and start creating/wanting the same shit that caused you to run south. 

Blano's picture

Lol, not me man....I came here to get away from the liberal claptrap.  Sorry to say though that liberal shit is here in parts too, especially south Dallas. 

However, I am looking forward to seeing the blonde bimbo babe get crushed in the Governor's election.

+1 for your comment though.

Freddie's picture

LOL! Don't a lot of people in Fort Worth think Dallas is filled with Yankees?  I forget the saying.  Texas starts West of Dallas or something.

Bawneee Fwank's picture

Thank you, folks like yourself are more than welcome.  You know what kind of people I'm talking about.  Like the fuckers from Jersey, I could be talking about going to Belize and somehow those fuckers will work in that they are from Jersey...I dont give a fuck that your from Jersey, if you love it so damn much take your ass back.

GOSPLAN HERO's picture

If you like your pension, you can keep your pension.

OneTinSoldier66's picture

If you don't like your haircut, you can eat your peas

 

"but, but but... they paid in!"

 

Yeah, into a political and public sector union ponzi scheme.

Rafferty's picture

Detroit has been destroyed because blacks - as they've shown EVERTWHERE - are incapable of running an advanced White-built society.  Why the hell does everybody avoid that blatantly obvious fact and instead blame the motor industry, Dems, 'liberals' or, craziest of all, White flight?

General Decline's picture

I've been to Africa on many occasions and, sadly, what you say is largely true. They seem to eventually break off into tribal warrior groups and start killing each other. Not unlike the gang problems we see here in the United States.

Promethus's picture

And now we have our first black President. Bet this turns out well!

LawsofPhysics's picture

Sheep are for shearing...

same as it ever was...

until it isn't...

MachoMan's picture

Yeah, when the sheep tear down the fences and roam free for a few minutes before being herded up again...

glenlloyd's picture

don't bother, they already know it...they've known that the Detroit situation has been unsustainable for years now.

Shad_ow's picture

Just try telling that to those you know who have pension funds they believe will pay out.  When I do, the reply is always "Oh yeah, they will just raise taxes."  How's that working out for Detroit?  Can't tax those who have no work.

WOAR's picture

You say that, but isn't there another article that just went up that says Thailand police got out of the way of protesters?

The police may be selfish, but they aren't stupid. They know when they're getting stabbed in the back.

Non Passaran's picture

Stabbed in the back my ass.
Switching loyalty to the highest bidder, that's what it was

SnobGobbler's picture

not only that, the bankers get to split up the art at the DIA.

Carpenter1's picture

Whole lot of sheeple currently experiencing a strange concept called reality. Even funds which assumed a city could never go bsnkrupt, and what's besutiful about this is Obama can't just print it, otherwise every city in the nation would be screaming for the same thing.

See, eventually even the printing press has its day in court.

Bastiat's picture

Might the Fed buy pension obligation bonds?  Maybe yeah--but only from banksters who are underwater on them.

madcows's picture

is it the banker's fault or the politician's fault or is it the union's fault?  I find more blame with the pol's and the untions than I do with the bankers.  No doubt, the bankers are corrupt and immoral, but they aren't the ones that negotiated the retirement deals that led to the city's bankruptcy, and they aren't the ones that wholely mismanaged the finances of the city.  If you want to blame anyone, blame the democratic mayors that have been there forever.

Road Hazard's picture

Yup, suck it cops of Detroit(sorry firefighters)!!!! Look what all the protecting of banksters got ya........ a big dick in the ass. Kiss your pensions GOODBYE!!!! Hope you all like the taste of dog food because that's all you'll be able to afford to eat when you're 65, living in a van down by the river!!! You all picked the wrong horse...... should have been on the side of the people. LULZ!

Canadian Dirtlump's picture

All the people adroitly stating ( for years in many cases ) that public pensions don't have a prayer of being met, and private ones have largely been sold off and or looted years ago ) will doubtlessly end up as prophets in the coming years. Meanwhile by their own admission they would say, it was written on the wall.

 

Same old situation You have high end wealth undulgences paid to insiders, bankers and the top end cronies as the standard operating procedure to foment positions of power and influence, and unrealistic promises to the unwashed masses like benefits and pensions to get elected.. It works well. Until it doesn't.