Bloomberg News

Detroit Emergency Manager Bans Mobile Phones at Creditor Meeting

June 13, 2013

Detroit Emergency Manager Kevyn Orr

Detroit Emergency Manager Kevyn Orr was appointed by Republican Governor Rick Snyder to oversee Michigan’s largest city. Photographer: Jeff Kowalsky/Bloomberg

Mobile phones and iPads will be banned and more than 100 creditors and union leaders will have to show photo identification to hear Detroit emergency manager Kevyn Orr demand concessions to erase a $386 million deficit.

The prohibition on handheld devices at tomorrow’s meeting will assure attention during a session meant to put Detroit on a path to viability, rather than a record reorganization in bankruptcy court, said Bill Nowling, Orr’s spokesman. It may last two hours, he said.

“We don’t want them tweeting or texting or Facebooking,” Nowling said. “They’re there to listen to our proposal and ask questions about it. We don’t want to give anybody an undue advantage over anyone else in the room in trying to game the system or trying to move numbers in the markets.”

The closed meeting at the Detroit Metropolitan Airport is meant to cap the creation of a recovery plan and foster negotiations over liabilities. Orr last month called for restructuring $9.4 billion in long-term debt that saps services. Standard & Poor’s and Moody’s have both cut the city’s credit rating in the past 24 hours.

The city’s population has dropped by a quarter since 2000, to around 701,000. Since 2008, Detroit has spent an average of $100 million more than its revenue each year.

Orr, a 55-year-old Washington bankruptcy lawyer, was appointed by Republican Governor Rick Snyder to supersede the city’s elected representatives and solve the fiscal crisis.

Same Page

Tomorrow’s meeting is a prudent step, said Doug Bernstein, a bankruptcy lawyer with Bloomfield Hills, Michigan-based Plunkett Cooney PC.

“You want to deliver the message so everybody’s hearing the same thing,” Bernstein said.

Nowling said the meeting will drive home the idea that a community’s future is at stake.

“This is not a business transaction,” he said. “We’re not liquidating a company. This is about making a city viable again.”

On June 10, Orr held a public hearing in Detroit to discuss his plan. Those coming from out of town tomorrow for the creditor meeting at a Westin Hotel 20 miles from the city may escape the wrath of citizens that emerged at the earlier session -- and public scrutiny.

“People could fly in for the meeting and leave unobserved,” Dan McNamara, Detroit Fire Fighters Association president and an invitee, said in a telephone interview.

Battle Ready

At the public hearing, Orr told more than 260 people that he would demand “painful sacrifices” and outlined finances that include more than $15 billion in long-term liabilities.

He said improving public safety and other services would be a priority, and that he would seek concessions from employee health care as well as givebacks from bondholders, such as lower interest rates or outright forgiveness of loans.

George Orzech, a member of Detroit’s police and fire fighters pension board, said the two retirement funds for city employees have set aside a combined $5 million for anticipated court battles with Orr.

Orzech said that while pensions are protected under the Michigan constitution, board members are worried the emergency manager will attempt to take control, even though he’s said he won’t cut benefits.

Art Preservation

Today, state Attorney General Bill Schuette said that the city can’t sell works from the Detroit Institute of Arts to pay debts, because they are held in public trust. Orr had asked for an inventory.

If creditors and retirees can’t be satisfied, Chapter 9 bankruptcy would be the last resort, said Orr. It would be the largest U.S. municipal bankruptcy.

Among bond insurers attending tomorrow’s meeting will be MBIA Inc. (MBI:US), based in Armonk, New York, said Kevin Brown, a spokesman. MBIA subsidiary National Public Finance Guarantee Corp. insures $100.7 million of Detroit general-obligation bonds and almost $2.5 billion in revenue bonds, mostly for the water and sewer system.

“Our plan is to go and listen to what Mr. Orr has to say and we’ll go from there,” Brown said.

Michael Camarella at OppenheimerFunds Inc., which oversees about $241 million of Detroit debt, said no one from his New York-based firm would attend.

“The insurers are representing our interests,” he said. “If there’s a payment interruption, it would be the insurers that are going to bear that, not the bondholders.

Bernstein said Orr is ‘‘swimming upstream.’’

‘‘Exhausting all remedies before you pull the trigger on bankruptcy is the right strategy,’’ he said.

And the tomorrow’s cloistered meeting may have unexpected benefits for those inside.

‘‘Not having a cell phone for a couple hours will be a relief,’’ Orzech said.

To contact the reporter on this story: Chris Christoff in Lansing at cchristoff@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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