While working to push Detroit back from a financial cliff, Kevyn Orr also prepares for going in the other direction, Free Press business writer Nathan Bomey explains in a news analysis.
Emergency Manager Kevyn Orr meets reporters after Friday morning's sit-down with Detroit creditors.
[AP Photo by Paul Sancya]
The emergency manager "continues to lay the groundwork for a potential Chapter 9 bankruptcy filing," Bomey writes.
The Motor City edged closer to that Friday when Orr declared the city is not paying its bills on time and that he would seek major concessions from bondholders, creditors and unions to clear debt obligations.
Missing bill payments is a key precondition for a Chapter 9 filing. . . .
Cities must also prove they’ve negotiated in good faith with creditors before filing for bankruptcy, a discussion process that was on full display Friday. . . . Orr warned that the city’s bondholders and creditors won’t fare well in bankruptcy court, so they should agree to concessions now.
A critical factor is whether city unions fight Orr's attempt to reduce pensions and health benefits. If they do, that "could lead him to catapult the city into bankruptcy court in a bid to secure the legal authority to slash payments," Bomey writes.
Orr told the Free Press editorial board on Friday afternoon that he’s ready to “pull the trigger if we have to,” but said he prefers to reach agreements outside bankruptcy. He meets with union leaders next Thursday to discuss pensions and other proposed changes affecting their members.
A municipal bond analyst, Alan Schankel of Janney Capital Markets in Philadelphia, says he "can’t imagine [the unions] are going to go quietly into the night and accept" pension and medical coverage cuts. “There’s lots of negotiations or court proceedings ahead,” he predicts in a conversation with Bomey.
