Expert witness concludes Detroit bankruptcy plan is feasible
Detroit's plan to adjust $18 billion of debt and exit the biggest municipal bankruptcy in U.S. history is feasible, according to an expert witness report obtained by Reuters on Monday.
Martha Kopacz, a senior managing director at Phoenix Management Services in Boston, who was chosen by U.S. Bankruptcy Judge Steven Rhodes in April as an expert witness in the case, also concluded in her report that the plan's revenue, expense and payment assumptions are reasonable.
But the report, which was based on more than 200 interviews as well as fact-gathering meetings, raised concerns over the speed of the city's bankruptcy case, filed a year ago. Specifically, the report noted that settlements reached with some of Detroit's major creditors may shrink the available resources for the city's post-bankruptcy efforts.
"This bankruptcy has been largely focused on deleveraging the city, often to the exclusion of fixing the city's broken operations," the report said.
"The bilateral mediations between the city and the creditor groups worked well to quickly deliver settlements of key disputes. However, the lack of time available for multiparty negotiation has resulted in settlements that, taken in total, greatly reduce the contingency available in the plan," it added.
Rhodes has set Aug. 14 for the start of a lengthy hearing on whether Detroit's plan is fair and feasible. The judge will also take into account the results of creditor voting on the plan that will be released later on Monday by the city.
Kopacz's role was to determine whether Detroit's assumptions regarding cash-flow projections and forecasts of revenue, expenses and plan payments are reasonable. She is also required to testify in the city's bankruptcy case.
Kopacz has rung up about $421,000 in consulting fees, $68,300 in expenses and nearly $25,000 in legal fees as of the end of May.