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Bankruptcy/Chapter 11 / Bonds

City of Detroit Plan Filed

The City of Detroit filed with the U.S. Bankruptcy Court a Third Amended Plan for the Adjustment of Debts and a related Disclosure Statement. According to the Disclosure Statement, “The Plan provides for the resolution of a variety of complex financial and operational issues faced by the City. The City believes that adjustment of the City’s debts pursuant to the Plan will provide the greatest recovery for creditors of the City, while simultaneously allowing for meaningful and necessary investment in the City. The Plan contemplates the City’s emergence from chapter 9 this year and represents a crucial step toward the City’s rehabilitation and recovery from a decades-long downward spiral. The Plan includes settlements that the City believes will inure to the benefit of the City’s creditors and its residents. The City settled controversial and sensitive issues relating to the Detroit Institute of Arts (the ‘DIA’), which settlement is expected to yield at least $466 million to provide a source of recovery for the approximately 33,000 individuals who participate in the City’s retirement systems - the General Retirement System and the Police and Fire Retirement System (together, the ‘Retirement Systems’) and which will free up other funds for distribution to other creditors - and negotiated a settlement with the State of Michigan (the “State”) for the benefit of Holders of Pension Claims. Except in the case of Subordinated Claims, the Plan provides a recovery to all classes of Claims. The Plan also allows for investment in the City of approximately $1.4 billion over ten years, which the City believes is critical and meaningful, in order to, among other things: (a) provide basic, essential services to City residents; (b) attract new residents and businesses to foster growth and redevelopment; (c) reduce crime; (d) demolish blighted and dangerous properties; (e) provide functional streetlights that are aligned with the current population footprint; (f) improve information technology systems, thereby increasing efficiency and decreasing costs; and (g) otherwise set the City on a path toward a better future. The City believes that the Plan gives the City the best chance of effectively adjusting its debts and reestablishing itself as a prosperous and productive American city.” The Court previously scheduled an April 28, 2014 hearing to consider the Disclosure Statement and a July 24, 2014 confirmation hearing.

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