LANSING – As Detroit public pension holders have complained about the cuts they may see in their retirement incomes, an analysis released Monday by a top Wall Street rating agency said Detroit bond holders are being hurt worse than pensioners.

The analysis of the city’s proposed plan of adjustment done by Moody’s Investors Services says the conditions outlined in the plan mean a legal challenge is “all but certain” with a “cram down possible.”

“Cram down” is a term in financial jargon meaning the involuntary imposition by a court of a bankruptcy reorganization plan despite the objections of some creditors.

And the analysis concluded: “If the city is unable to achieve consensus with all classes of impaired creditors, a bankruptcy court may still approve the plan via the cram down process. Impairment and subsequent cram down on special revenue creditors, however, has not occurred in a Chapter 9 setting.”

Detroit Emergency Manager Kevyn Orr released the proposal on Friday. Governor Rick Snyder called it a thoughtful proposal to help lead the city’s revival. His expected Democratic opponent U.S. Rep. Mark Schauer blasted the proposal for not protecting the pensions of city workers.

The proposal calls for the pensions of Detroit police and firefighters to be cut by 10 percent, and for other workers to be cut by 34 percent. But if representatives of the two retiree groups quickly agree to the proposal, the general employee pension cuts could be reduced to 26 percent and to police and fire would be reduced to 4 percent.

City workers and a number of commentators charged over the weekend that the pension cuts were too drastic, especially for those retirees who have the smallest pensions.

But the analysis charged that pensioners are “treated far better” than either general obligation or so-called certificate of participation bond holders. (The COP holders are involved in a controversial 2005 arrangement negotiated by then Mayor Kwame Kilpatrick and that Orr is challenging in federal court, arguing the claims brought by the COP holders are not allowable.)

In the 120-page plan, secured bond holders – which would include those holding bonds for the Detroit Water and Sewerage Department – would get 100 percent repayment on their holdings.

Unsecured bond holders would see payments of 20-cents on the dollar.

General obligation bondholders would be considered unsecured, the Moody’s analysis said.

And the certificate of participation holders face the potential of getting nothing at all, Moody’s said, though there is a provision for COP claimants who settle to get as much as 40 percent on their holdings.

There are already lawsuits underway, which Moody’s said could affect the plan. One is from GO bondholders arguing that they and the holders of limited tax bonds should have first priority over other claimants, Moody’s said. And if the city’s argument that COP holders should not receive recovery prevails, then the GO bond holders would be paid out of the same funds that would have gone to the COP holders.

Further lawsuits, especially to the plan of adjustment, could be expected because creditors are barred from making their own alternative proposal to the plan, Moody’s said.

Also, city workers could challenge the plan, Moody’s said.

Moody’s has raised a number of worries about the bankruptcy, the largest municipal bankruptcy in U.S. history, in the past. It has expressed concerns about a sense coming from Orr and Snyder that the pensioners could get favored treatment over the bondholders.

Considering the size and scope of the Detroit bankruptcy, Moody’s has suggested in the past that how decisions are made in the bankruptcy could dramatically affect future Chapter 9 filings, and possibly future municipal finance options.

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