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Alternative Market Briefing

Distressed debt funds look at Detroit, Miami for opportunities

Wednesday, July 24, 2013

Bailey McCann, Opalesque New York:

Detroit, Michigan is 312 years old. A quick scan of birthday etiquette rules on what to get for such an age won’t yield much, but I’m betting Emily Post wouldn’t have recommended bankruptcy. Yet, that’s exactly what the city will be getting for its birthday this year. Detroit made history when it filed for the largest municipal bankruptcy so far, at the tail end of last week, and that filing was only the opening volley in what will likely be a long protracted battle for the future of the Motor City.

This morning, the first bankruptcy related court hearing is set to start at 10 a.m. Judge Steven Rhodes will hear arguments on lawsuits that were filed against the city before the bankruptcy claim was filed and whether those cases can move forward. Basically what’s happening is this – under Chapter 9 bankruptcy – the type of bankruptcy filed by emergency manager Kevyn Orr, the city may be eligible for a stay on pending litigation, forcing those plaintiffs to fight it out in bankruptcy court. However, the courts have to allow the bankruptcy to move forward, first.

That hearing won’t come up for a few weeks, but today’s arguments are part of a broader issue – whether Detroit can file at all. Currently, there are federal and state objections to the filing, and pensioners who are expected to take some of the biggest haircuts in any deal, are arguing that the filing violates the state constitution.

"I think it is too soon to......................

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