Detroit is likely to file for bankruptcy after two municipal pension funds sued city emergency manager Kevyn Orr.
The Motor City faces $20 billion of long-term liabilities. The Wall Street Journal's Matt Dillon says those holding onto $11 billion in unsecured debt are basically staring into the abyss, facing the prospect of getting next to nothing from the city's obligations.
If, as expected, the city files for Chapter 9 protection, it will be the largest municipal bankruptcy in U.S. history, dwarfing Jefferson County, Ala.'s $3.1 billion sewage district restructuring.
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The pension funds want to block Orr's attempt to drastically reduce the amount of benefits owed to current and former city workers.
The funds are fully aware that they could still face such cuts even if the city is forced to go to court, but say they'd prefer to fight the cuts there. Here's the Freep's cut from their suit:
It appears imminent the governor will grant the emergency manager the unconditional power to proceed under Chapter 9 (bankruptcy) and the emergency manager will seek to have the city’s pension debts impaired pursuant to Chapter 9 unless the retirement systems and their participants accept the emergency manager’s unilateral imposition of significant impairments to their accrued financial benefits.
Dillon says a filing could come within days.
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