Detroit did not negotiate pre-bankruptcy: financial adviser

Reuters News
Posted: Nov 07, 2013 5:04 PM
Detroit did not negotiate pre-bankruptcy: financial adviser

By Joseph Lichterman

DETROIT (Reuters) - The financial adviser for Detroit's two pension funds testified in federal court on Thursday that the city did not negotiate prior to filing the largest municipal bankruptcy in U.S. history in July.

The adviser's testimony came on the eighth day of an eligibility trial as Detroit tries to prove to U.S. Bankruptcy Judge Steven Rhodes that it is insolvent and that it acted in good faith when it deemed negotiations were just impractical.

"In your judgment, did any negotiations take place between the city and the retirement systems prior to the Chapter 9 filing?" pension fund attorney Ron King asked Bradley Robins, who is advising the funds.

"No," said Robins, who heads Greenhill & Co's financing advisory & restructuring for North America.

Lawyers for the city, the unions, the retirees and the pension funds opposed to the bankruptcy are set to begin their closing arguments on Friday.

Rhodes' decision on whether the city, which has more than $18 billion in debt and liabilities, is eligible for municipal bankruptcy could come later this month.

Robins said he viewed a June 14 city report, which proposed offering unsecured creditors, including the pension funds, pennies on the dollar "as a shot across the bow."

"I took it as the city putting the creditors on notice that it wanted to begin the process of wanting to have a discussion," he said.

But Robins said no negotiations transpired, despite a handful of meetings between the creditors and the city before it filed for bankruptcy on July 18.

He added that there was not enough time to fully evaluate the city's financial data between the June 14 proposal and the filing date.

City attorneys countered that Robins never spoke up during meetings leading up to the bankruptcy filing where the city's plans to cut pension and retiree healthcare benefits were discussed.

Lawyer Thomas Cullen, who represents the city, pushed Robins over whether he even had authority to negotiate on behalf of the pension funds.

"So you never offered the city any finite negotiation path?" Cullen asked.

"That is correct," Robins replied.

(Reporting by Joseph Lichterman; Editing by Leslie Gevirtz)