April 9 (Bloomberg) — Detroit Emergency Manager Kevyn Orr said he wants debt-cutting agreements with retirees and city employees by early next week to give 170,000 creditors a clearer picture of a bankruptcy plan they’ll vote on starting next month.
Court mediators today announced an agreement for the bankrupt city to pay some bondholders 74 percent of $388 million they are owed. The plan would shift about half the remaining $100 million to pension systems, which face reductions under Orr’s plan to cut Detroit’s $18 billion debt.
Orr said in an interview at Bloomberg News headquarters in New York that the deal should make creditors realize time is short.
“It’s in everybody’s interest to get aboard this train,” he said. “This train is leaving the station one way or another.”
Orr had initially proposed paying general-obligation bondholders 15 cents on the dollar.
The new deal would increase to $916 million the amount the plan would contribute to reduce cuts to retiree benefits. Additional money would be earmarked to keep pensioners from falling below the federal poverty line because of benefit cuts.
Court mediators have forged a deal with private foundations, the state of Michigan and the Detroit Institute of Arts to donate $816 million to the pension funds. In return, the city’s art collection would be placed in a trust and shielded from a forced sale to pay creditors.
The $350 million in state money pledged by Republican Governor Rick Snyder still must be approved by the legislature.
Retirees and city unions have opposed the deal, saying it would harm those who rely on pensions. Orr has urged them to accept the money rather than face deeper benefit cuts.
Detroit filed for bankruptcy in July, saying it couldn’t meet its financial obligations and still provide services. The city has since been in negotiations over cuts with municipal unions, retired workers and bond insurers.