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Wednesday, 04 December 2013 15:33

Stakes now even higher for Detroit retirees

DETROIT (AP) - Some experts believe the time is right for serious talks aimed at solving a pension shortfall in Detroit's bankruptcy case.

Judge Steven Rhodes said Tuesday that pensions can be cut as part of an overall plan to bring Detroit out of bankruptcy.  It's a blow to more than 20,000 retirees who argue that the Michigan Constitution offers complete protection.

Most city pensioners get less than $20,000 a year.

Former bankruptcy judge Melanie Cyganowski says a settlement would bring certainty to anxious retirees. Unions acknowledge that negotiation is important but they're pledging to appeal the judge's decision.

Detroit emergency manager Kevyn Orr says he understands the hardship. But he says the city doesn't have money to shore up pension funds that are underfunded by $3.5 billion.

Published in National News

WASHINGTON (AP) — There seems little appetite from either Democrats or Republicans in Washington for a federal rescue of the birthplace of the automobile industry. Detroit now stands as the largest American city ever to file for bankruptcy protection.

During the bleakest days of the Great Recession, Congress agreed in bipartisan votes to bail out two of Detroit's biggest businesses, General Motors and Chrysler.

Such a bailout would be huge, perhaps as much as $20 billion. Federal resources are strained, with the national debt at $16.7 trillion and the federal government struggling under the constraints of automatic spending cuts that took effect in March.

Published in National News

DETROIT (AP) — Detroit on Thursday became the largest city in U.S. history to file for bankruptcy, as the state-appointed emergency manager filed for Chapter 9 protection.

Kevyn Orr, a bankruptcy expert, was hired by the state in March to lead Detroit out of a fiscal free-fall and made the filing Thursday in federal bankruptcy court.

A number of factors — most notably steep population and tax base falls — have been blamed on Detroit's tumble toward insolvency. Detroit lost a quarter-million residents between 2000 and 2010. A population that in the 1950s reached 1.8 million is struggling to stay above 700,000. Much of the middle-class and scores of businesses also have fled Detroit, taking their tax dollars with them.

In recent months, the city has relied on state-backed bond money to meet payroll for its approximately 10,000 employees.

Orr was unable to convince a host of creditors, the city's union and pension boards to take pennies on the dollar to help facilitate the city's massive financial restructuring. If the bankruptcy filing is approved, city assets could be liquidated to satisfy demands for payment.

"Only one feasible path offers a way out," Gov. Rick Snyder said in a letter to Orr and state Treasurer Andy Dillon approving the bankruptcy.

Snyder determined earlier this year that Detroit was in a financial emergency and without a plan to improve things. He made it the largest U.S. city to fall under state oversight when a state loan board hired Orr in March. His letter was attached to Orr's bankruptcy filing.

"The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services," Snyder wrote. "The city's creditors, as well as its many dedicated public servants, deserve to know what promises the city can and will keep. The only way to do those things is to radically restructure the city and allow it to reinvent itself without the burden of impossible obligations."

A turnaround specialist, Orr represented automaker Chrysler LLC during its successful restructuring. He issued a warning early on in his 18-month tenure in Detroit that bankruptcy was a road Detroit and its creditors did not want to tread.

He laid out his plans in June meetings with debt holders, in which his team warned there was a 50-50 chance of a bankruptcy filing. Some creditors were asked to take about 10 cents on the dollar of what the city owed them. Underfunded pension claims would have received less than the 10 cents on the dollar under that plan.

Orr's team of financial experts put together said that proposal was Detroit's one shot to permanently fix its fiscal problems. The team said Detroit was defaulting on about $2.5 billion in unsecured debt to "conserve cash" for police, fire and other services.

"Despite Mr. Orr's best efforts, he has been unable to reach a restructuring plan with the city's creditors," the governor wrote. "I therefore agree that the only feasible path to a stable and solid Detroit is to file for bankruptcy protection."

Detroit's budget deficit is believed to be more than $380 million. Orr has said long-term debt was more than $14 billion and could be between $17 billion and $20 billion.

Published in National News
A bankruptcy filing this week means a St. Charles County woman who successfully sued the producers of "Girls Gone Wild" videos may never see her court ordered award.

GGW Brands filed for Chapter 11 bankruptcy in Los Angeles Wednesday. The petition listed more than $16 million in disputed claims, including the nearly $6 million a judge awarded to Tamara Favazza in 2010.

Favazza had sued GGW subsidiaries Mantra Films and MRA Holding after she appeared in a "Girls Gone Wild" video. Favazza claimed that in 2004 someone working for the production company had lifted her tank top in front of the camera, and that she hadn't agreed to expose herself for the video. The incident happened at a downtown St. Louis bar.

Favazza’s lawyers are still battling to collect the judgement.
Published in Local News

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