It looks like Detroit might just get to hold on to its multi-billion dollar art collection after all. On Wednesday, September 10th, a judge suspended Detroit’s ongoing bankruptcy trial for almost a week to give both sides time to finalize a settlement that would satisfy a major bond insurer creditor that had previously opposed the city’s bankruptcy plan.
Negotiators for the city and bond insurance firm Syncora Holdings Ltd. (OTCMKTS:SYCRF), which stood to lose about $400 million under Detroit’s current bankruptcy plan, came to a last-minute deal on Tuesday afternoon. As part of the deal, the city will extend Syncora’s lease on a major tunnel between the U.S. and Canada as well as offer a long-term lease on a downtown parking garage and other unspecified concessions.
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Detroit’s bankruptcy plan proposes writing off $7 billion in debt and investing over $1.7 billion in city services over the next ten years.
Syncora to recover 26% in Detroit bankruptcy
According to Syncora spokesman Steven Schlein, the firm would recover around 26% of its claim with the negotiated settlement.
Details of the deal include Syncora Holdings Ltd. (OTCMKTS:SYCRF) receiving $23.5 million in cash for a $120 million bond.
The firm also receives a long-term lease to manage the parking structure under Grand Circus Park. Syncora is required to make $13 million in improvements to the facility, but is guaranteed $21.6 million in revenue from the parking garage. The city receives 25% of the revenue during the term of the lease.
Syncora also receives an extended lease from 2020 to 2040 as well as net revenue from the Detroit side of the Windsor (Ontario) tunnel. Analysts say this comes to around $4 to $5 million a year.
As part of the deal, the firm will also get a “coupon” valued at $6 million to use to buy downtown riverfront property that could possibly include Ford Auditorium and the Joe Louis Arena site after the Red Wings move to Foxtown in 2016.
Of note, Syncora is just one of many creditors in the case, but it has been a vociferous objector during most of the bankruptcy process. Virtually everyone is backing the currently constituted Detroit bankruptcy plan, even thousands of city retirees whose pensions will be reduced by 4.5%.