DETROIT – An agreement with three large holders of general obligation bonds in Detroit was announced Wednesday, a move that the city’s Emergency Manager Kevyn Orr said could provide major assistance in assuring some lower income city pensioners do not fall into poverty.

The agreement is also one of the first major steps taken to resolve what is now the largest municipal bankruptcy in the United States.

The settlement was announced Wednesday morning by the bankruptcy mediators assigned to reach agreements on the debt obligations on the city’s Chapter 9 bankruptcy procedure.

In a statement released by the mediators, they said they hoped this announcement would encourage others to also agree to mediation to resolve the bankruptcy, now in its 10th month.

The settlement would pay the holders of $388 million in general obligation bonds 74 cents on the dollar, for a total of $287.5 million.

The payment to the bondholders is drastically higher than Orr proposed when he released his bankruptcy settlement plan earlier this year. In that plan, he proposed holders of the general obligation bonds would have been paid 20 cents on the dollar.

That proposal raised worries by Wall Street ratings firms, which said the payments would favor pensioners over bondholders.

The National Public Finance Guarantee Corporation, Ambac Assurance Corporation and Assured Guaranty Municipal Corporation agreed to the settlement.

Even with the reduction, the bondholders will see most of their investment recouped because bond insurance will pay the remainder. At least one bond insurance firm praised the settlement, saying it would reduce its obligation compared to Orr’s proposed payment.

The parties have been in closed-door discussions since October. In their statement, the mediators said they had been “privileged to have played a role in assisting the parties to find common ground in reaching a resolution that reflects not only a fair settlement to the parties, but also creates an opportunity for the city to provide additional assistance to its retirees.”

The statement also said the mediators hoped this agreement would “encourage all the remaining parties to the bankruptcy to re-double their mediation efforts to reach meaningful agreements which can be incorporated into a fair and balanced agreed-upon plan of adjustment to be presented to the bankruptcy court for confirmation.”

And speaking to reporters, Orr urged various parties in the bankruptcy to reach deals and not face “cram downs” – where a payment amount is forced on a party – or litigation.

The settlement also comes several weeks before pensioners are to consider the proposal made by Orr that would cut non-law enforcement pensions by 24 percent (34 percent if the pensioners do not agree with proposal) if a “Grand Bargain” involving the state, foundations and the Detroit Institute of Arts is reached.

Had a settlement not been reached with these bondholders, observers expected a long legal process that could have delayed and reduced potential payments.

Orr said after the agreement was announced that of the $100 million savings the city will see on the general obligation bonds, $27 million will be used to make back payments on bonds.

But $57 million will be used to ensure that city pensioner payments are at least 133 percent of the federal poverty level for individuals, a figure that is more than $15,000 a year.

The remainder will go to city pension funds, Orr said.

Governor Rick Snyder has called for a fund to protect the lowest income pensioners, and the $57 million Orr announced will go much of the way to meeting that call.

Orr told reporters the $57 million would help Detroit public pensioners from falling into poverty.

Not everyone was impressed with the agreement, however. Former Michigan Democratic Chair Mark Brewer took to Twitter to say the protection offered by the settlement was pretty thin for pensioners.

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