DETROIT (AP) — The plan to restructure billions of dollars in debt is the vehicle the Motor City needs to free up funds to provide services to residents and allow the city to survive, one of Detroit's attorneys told the federal judge at the helm of the historic bankruptcy trial, which started Tuesday.
Bruce Bennett said during his opening statement before federal Judge Steven Rhodes that Detroit has operated in distressed conditions for so long that it requires vast amounts of investment.
"Detroit won't survive or recover until this is done," said Bennett, an attorney with the Jones Day law firm that was hired to help the city through the largest municipal bankruptcy in U.S. history.
Tuesday was the first in what's likely to be a number of days in which lawyers from the city and other creditors will debate the city's debt, the rights of its creditors and what is allowable under bankruptcy law. Dozens of witnesses are expected to be called.
Detroit wants to cut $12 billion in unsecured debt to about $5 billion through its plan of adjustment that has to be approved by Rhodes. The plan's architect, state-appointed emergency manager Kevyn Orr, guided Chrysler through its bankruptcy.
Most creditors, including more than 30,000 retirees and city employees, have endorsed the plan of adjustment. The strongest opposition is coming from New York-based Syncora Guarantee, who has said its claims with the city are about $400 million.
Syncora and some other creditors have pushed for the city to look into the sale of assets, including city-owned pieces in the Detroit Institute of Arts.
But Bennett said under state law, city assets cannot be sold to satisfy creditor demands.
That should have been a "powerful warning to every potential lender and insurer not to lend money to a Michigan municipality based on the expectation that a creditor can compel the sale of an asset," he said.
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