Court's expert witness on Detroit bankruptcy qualified to testify: judge

Reuters News
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Posted: Sep 16, 2014 5:57 PM

By Lisa Lambert

DETROIT (Reuters) - An expert witness hand-picked by the federal judge overseeing Detroit's historic bankruptcy case will testify on the feasibility of the city's debt adjustment plan without restrictions, the judge ruled on Tuesday.

U.S. Bankruptcy Judge Steven Rhodes said Martha Kopacz, a senior managing director at Phoenix Management Services in Boston, is qualified to give her expert opinion, noting that her "specialized knowledge will help the court to understand the

evidence and to determine whether the city’s plan of adjustment is feasible."

Detroit's Police and Fire Retirement System and General Retirement System had filed a motion to exclude Kopacz’s testimony relating to the pension systems, contending she lacks qualifications on those matters and testifying about the pension funds was beyond the scope of her appointment.

In the wake of Monday's evidentiary hearing that put Kopacz on the stand for questioning, Rhodes concluded that her opinions are based on sufficient facts or data and are the product of reliable principles and methods.

The judge added that Kopacz will also address whether the assumptions supporting the city’s cash-flow projections, as well as revenue, expense and plan payment forecasts are reasonable.

Rhodes said the retirement systems will be allowed to address their issues with Kopacz by questioning her on the stand when she testifies on the plan later in the confirmation hearing, which began on Sept. 2. Rhodes will use the hearing to determine if Detroit's plan to shed about $7 billion of its $18 billion of debt and obligations is fair and feasible.

Kopacz said on Monday that while she would not describe herself as one who enjoys studying pension issues, "you can put your head in it and you can understand it if you have to."

"Pension issues are not magical," she said. "They are not a super science no one in this room can understand."

Kopacz added she would "probably" release another report after the seventh amended version of the plan was posted by Detroit. That version was filed with the court early on Tuesday and included the city's recent settlement with one of its last major hold-out creditors - bond insurer Syncora Guarantee Inc.

A July 18 report by Kopacz, who was chosen by Rhodes in April as an expert witness, concluded that the plan was feasible and that its revenue, expense and payment assumptions were reasonable.

However, Kopacz raised concerns over the speed of the bankruptcy case and that existing settlements with creditors may have already left the city with limited resources to pay for its post-bankruptcy efforts.

"This bankruptcy has been largely focused on deleveraging the city, often to the exclusion of fixing the city’s broken operations," she wrote.

(Additional reporting by Karen Pierog in Chicago; editing by Matthew Lewis)