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Alternative Market Briefing

Group of hedge funds close to sealing deal with Detroit

Wednesday, October 22, 2014

Komfie Manalo, Opalesque Asia:

A group of hedge funds is seen to approve a breakthrough deal between the embattled city of Detroit and a bond insurer, bringing the city a step closer to ending its bankruptcy, the Detroit News reported.

Bankruptcy lawyer Thomas Moers Mayer, who is representing the hedge funds, told U.S. Bankruptcy Judge Steven Rhodes that he expects the financial creditors would finally seal the deal on Thursday.

Under the settlement deal between the city of Detroit and bond insurer Financial Guaranty Insurance Co, the hedge funds will split $141m in new notes. Detroit owes the hedge funds at least $1bn.

In mid-July several hedge funds snapped up more than $750m of Detroit’s distressed debt on the belief they could profit from the city’s bankruptcy.

Viewed by critics as "vulture investors," the hedge funds’ arrival could actually be a good sign for Detroit. Although they may drive a hard bargain in negotiations with the city, hedge funds are typically predisposed to strike settlements so that their money isn’t tied up in one single investment for too long.

Also watch our Opalesque.TV interview with George Schultz as he discussed "The Art of Vulture Investing" here:......................

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