SYNCORA MAKES UNTOLD MILLIONS OFF COPS DEAL, WHICH DETROIT EM KEVYN ORR CALLED ‘VOID AB INITIO, ILLEGAL AND UNENFORCEABLE” IN LAWSUIT STILL PENDING BEFORE BANKRUPTCY JUDGE RHODES.”
$44.8 Million in new debt (e.g. principal PLUS interest)
Detroit-Windsor Tunnel, Grand Circus Garage PLUS REVENUES
Syncora clarifies reports: it’s the whole damn POC deal, not just swaps
(VOD: See interview with former Detroit mayoral candidate Tom Barrow in post below this regarding the role of Syncora, racism and the banks in stealing Black Detroit. After we obtain today’s court filing, VOD will follow up.)
By Steven Church – Sep 15, 2014
Detroit bankruptcy holdout Syncora Guarantee Inc. (SYCRF) will recover about 14 percent on what it’s owed in a deal that includes $44.8 million in new debt, as creditor Financial Guaranty Insurance Co. seeks more time to fight the city’s debt-cutting plan.
Syncora has claimed it’s owed more than $333 million. Under its agreement with Detroit, the bond insurer will get two sets of notes, a lease to operate a tunnel to Canada, land near the tunnel and the option for a long-term lease to operate a parking structure.
The deal is a “very favorable one to the city,” David Heiman of Jones Day, a lawyer for Detroit, told U.S. Bankruptcy Judge Steven Rhodes at a hearing today after he disclosed the accord and Syncora’s estimated recovery. The parties have “laid down their swords,” he said.
While the settlement with Syncora may help speed Detroit’s record municipal bankruptcy to completion, FGIC remains a significant obstacle, as it faces claims on about $1.1 billion in pension debt it insured. The city planned to almost wipe out that debt, offering holders only about 10 cents on the dollar.
Should investors in the pension debt take losses, FGIC may be forced to pay them. Cutting the pension debt is part of the city’s plan to eliminate more than $7 billion in liabilities while shoring up its retirement system with money from the state and private donors.
Pension Debt
Syncora Guarantee insures more than $300 million of the pension debt and also holds some of the debt directly. The company also insured some tax-backed bonds. Shares of parent Syncora Holdings Ltd. fell as much as 1.8 percent to $2.16 today.
Jan. 31, 2005: Wall Street ratings agencies Fitch (Joe O’Keefe speaking) next to Standard and Poor’s (Steven Murphy to his left) with former Detroit CFO Sean Werdlow (l) and Deputy Mayor Anthony Adams (r), push “void ab initio, illegal and unenforceable” $1.5 BILLION Certificates of Participation deal at Detroit City Council table.
FGIC today asked Rhodes to halt the trial over the city’s plan later this week so the company can adjust its strategy to fight it in light of the Syncora settlement. The judge last week put the proceeding on hold to give Syncora and Detroit time to iron out the details of their agreement.
Rhodes asked FGIC and the city to talk later today to come up with a schedule that would give the New York-based company time to collect information about the Syncora deal and hire an expert to testify against it. The trial, in which the judge is considering the feasibility and fairness of Detroit’s plan, then continued with the testimony of a pension expert.
Many city retirees will fall below poverty level through pension cuts; Syncora claimed it was being treated worse than pensioners.
Detroit, a city of about 700,000, filed an $18 billion municipal bankruptcy last year, saying decades of decline left it unable to provide basic services and still meet financial obligations. Since then, Detroit Emergency Manager Kevyn Orr has cut deals with city unions, retired workers and some bondholders to pay them less than they are owed.
Two Series
Under its pact, New York-based Syncora will get two series of notes from the city. The B notes will be worth about $23.5 million, while a series of C notes will be worth $21.3 million and bear a 5 percent interest rate.
The C notes will be tied to parking revenue. The company will also have the option to take over and develop additional parcels for development that will be disclosed in the next few days, lawyers for the city said today at the hearing.
Ryan Bennett of Kirkland & Ellis, an attorney for Syncora, told the judge his client planned to withdraw its objections to the city’s debt-reduction plan.
“This is a big day for Syncora and a big day for the city of Detroit,” Bennett told Rhodes.
- DETROIT INSTITUTE OF ARTS: Banks already stole Detroit’s art under bankruptcy plan. City Council voted to turn it over into a so-called “trust.”
Detroit’s bankruptcy plan hinges on a bargain with philanthropic foundations and the state government, who agreed to contribute more than $800 million to the city’s public pension system (VOD: while the city said it would not contribute to the system for at least 10 more years.) In exchange, Detroit pledged not to use its art collection to pay debts.
FGIC has said the city could use the collection to boost payments to creditors whose claims the insurer may otherwise be forced to cover.
The case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).
Syncora Holdings Issues Statement Correcting Reports of Detroit Settlement
NEW YORK, Sept. 11, 2014 /PRNewswire/ — Syncora Holdings Ltd. (“Syncora”) today issued a statement correcting certain reports in the media concerning the City of Detroit (the “City”) bankruptcy and the status of settlement discussions with, and recoveries to be received by, its wholly owned New York financial guarantee insurance subsidiaries, Syncora Guarantee Inc. and Syncora Capital Assurance Inc. (the “Companies”).
The Companies and the City have reached tentative settlements of the Companies’ claims in the Detroit bankruptcy proceedings, subject to certain contingencies. Resolution involves settlement of the Companies’ Class 9 claims in connection with the Pension Obligation Certificates of Participation (valued at approximately 13 cents on the dollar) and a settlement of swaps-related and other litigation.
City retirees certainly won’t be staying here at the Reefs in Bermuda, where Syncora is headquartered.
Separately, Pike Pointe Holdings LLC (“Pike Pointe”), a subsidiary of Syncora Guarantee Inc., is advancing development agreements with the City of Detroit and the City of Windsor with respect to the Detroit Windsor Tunnel and related or adjacent properties. Pike Pointe is a holding company for investment in and operation of infrastructure assets (including toll assets and parking, among others) through its American Roads and Detroit Windsor Tunnel LLC subsidiaries (both based in Detroit), which include a lease to operate the U.S. portion of the Detroit Windsor Tunnel. Under the development agreements, Pike Pointe will solidify its long-term business in Detroit by agreeing to invest in and develop assets in the City of Detroit, pending related due diligence.
About Syncora Holdings Ltd.
Syncora Holdings Ltd. (OTC: SYCRF) is a Bermuda-domiciled holding company. Each of Syncora Guarantee Inc., Syncora Capital Assurance Inc. and Pike Pointe Holdings LLC are wholly owned subsidiaries of Syncora Holdings Ltd. For more information, please visit www.syncora.com.
Investor and Media Contact: Michael Corbally +1 212-478-3400 michael.corbally@scafg.com
