Forward Motions: Judge Could Clear Detroit to Leave Bankruptcy

Detroit could get a ticket to get out of bankruptcy next Friday.

U.S. Bankruptcy Judge Steven Rhodes will reveal his decision on whether the city’s bankruptcy-exit plan, which cuts $7 billion in debt, is fair.

City leaders and creditors picked through the details of the plan during a trial that lasted several weeks. The plan calls for $275 million in new borrowing and a $1.7 billion reinvestment in removing blighted buildings and boosting police and fire services in the city.

With Judge Rhodes’s approval, city leaders say Detroit could be out of bankruptcy court as soon as Thanksgiving, bringing to close the largest municipal bankruptcy in U.S. history. The 680,000-resident city filed for bankruptcy on July 18, 2013, to try to negotiate cuts to $18 billion in debt, blaming tax revenue that fell after the real-estate crash and the city’s population decline.

Throughout the case, Detroit leaders fought pressure from some Wall Street creditors and others to sell the city’s valuable art collection to repay a greater portion of the city’s debt. Federal mediators helped negotiate a deal to use more than $800 million from private foundations and the state of Michigan to avoid that sale and make the cuts to city’s worker pensions less severe.

Some individual objectors are still challenging the reorganization plan, arguing in part that the city’s emergency manager acted improperly in cutting any benefits to pensioners.

On Monday, the owner of the Scrub Island resort in the British Virgin Islands will battle a bank for the chance to get out of bankruptcy.

Scrub Island’s owner filed for Chapter 11 protection nearly a year ago to stop FirstBank Puerto Rico from foreclosing on the 230-acre island and its 53-room resort. FirstBank Puerto Rico officials are protesting the resort’s latest bankruptcy-exit plan, saying that it relies on an unrealistic budget and that the bank would be repaid only a fraction of the $121 million owed by the resort’s owner and an affiliated company.

With the exception of FirstBank Puerto Rico, the resort’s creditors voted to approve the plan, the resort’s lawyers said in court papers.

The resort opened in 2010 and is part of Marriott’s upscale Autograph Collection. Nearly all of the resort’s 138 employees live in the British Virgin Islands, making it one of the largest employers there.

Law firms, financial advisers and others who worked on the Genco Shipping & Trading Ltd. bankruptcy head to U.S. Bankruptcy Court in Manhattan on Tuesday to win approval of fees billed from its April 21 filing through its emergence from Chapter 11 protection July 9. Genco Shipping is under the control of its lenders after shedding more than $1.2 billion in debt.

The fees and expenses scheduled for approval—many of them reduced after facing objections from a federal bankruptcy monitor—include $14 million billed by Genco Shipping advisers and $7.8 million billed by advisers to a committee of equity holders that played a large role in the case.

Kramer Levin Naftalis & Frankel LLP served as lead legal counsel to Genco Shipping and is asking for nearly $7 million in fees and expenses. Sidley Austin LLP, lead counsel to the equity committee, is requesting $5.86 million after agreeing to reduce its fees by more than $800,000. Genco Shipping’s financial adviser, Blackstone Advisory Partners LP, billed $5.78 million. The committee’s financial adviser, Rothschild Inc., is asking for $1.65 million. The U.S. trustee’s office continues to oppose the $447,640 billed by CMG Advisory Services, which gave shipping industry advice to the equity committee. In court papers, CMG Advisory has stood by its fees.

The dry bulk shipper entered bankruptcy after agreeing to a “prepackaged” deal with creditors on the terms of its financial restructuring. But plans for a quick spin through Chapter 11 were nearly derailed when a group of hedge funds sought to increase its recoveries beyond what was originally promised. Following a legal fight over the shipping company’s value, a bankruptcy judge sided with Genco Shipping.

-Matthew Dolan contributed to this article.

Write to Katy Stech at [email protected]. Follow her on Twitter at @KatyStech. Write to Sara Randazzo at [email protected]. Follow her on Twitter at @sara_randazzo.