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Mediation Begins For Detroit Bankruptcy Dispute

Thursday, August, 29, 2013

A six-member team of mediators will review the Detroit bankruptcy case with the goal being to sort out disputes between the city and the many creditors.  The Detroit bankruptcy case is the biggest municipal bankruptcy filing in U.S. history at this time, and one Oregon judge with a history of mediation is working on the case to help bring about a resolution.


U.S. Bankruptcy Judge Elizabeth Perris from Portland has made a practice of serving as a “traveling mediator” and she hopes to continue today by getting started on resolving Detroit bankruptcy issues out of court.  The head mediator on the case is Chief U.S. District Court Judge Gerald Rosen, who assigned Perris to assist with a proposal to settle approximately $250 million in debt regarding interest rate swaps with Bank of America and UBS.


The city is looking for a quick resolution of this issue, which would help to reduce $50 million in annual debt payments.  This would also free up $11 million in casino tax revenue, which would allow the city to spend money immediately on public safety services.  Currently, Syncora Guarantee, one insurer of Detroit’s pension debt, is going after the casino revenue.


Perris has previously served as a bankruptcy appeals judged and has worked with numerous city bankruptcies as a mediator, including one ongoing case.  Mediation is being used in the Detroit bankruptcy as one way to reduce the likelihood of lengthy and costly litigation.  Getting more items resolved out of the courtroom has been helpful in coming to efficient terms with both parties in numerous other bankruptcy cases.  The first mediation session begins this week in a downtown courtroom between attorneys representing Kevyn Orr (Emergency Manager), banks, bond insurers, city pension fund representatives, and Detroit casinos.  The proceeding is closed to the public.  Further meetings with larger groups of creditors are scheduled.