Fight over Detroit's casino revenue resurrected by appeals court
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on July 03, 2014
A casino sign in Greektown, Detroit. A federal appeals court ruling on Wednesday ordered the resurrection of a challenge to the protection of casino revenues in Detroit's bankruptcy case.DETROIT, MI -- The U.S. 6th Circuit Court of Appeals on Wednesday ordered the resurrection of a challenge to the protection of casino revenues in Detroit's bankruptcy case.
The city in 2009 offered casino revenue as collateral in a series of borrowing deals made to help meet pension obligations, and bond insurer Syncora Guarantee Inc., since Detroit stopped making debt service payments before filing bankruptcy in the summer 2013, has been seeking to tie up those funds.
U.S. Bankruptcy Judge Steven Rhodes in August 2013 ruled that the casino revenues were city property protected by the bankruptcy process, and that Syncora had no legal standing to prevent the funds from reaching city coffers.
Syncora appealed to U.S. District Judge Bernard Friedman, who in April put the issue on hold pending a decision from the appeals court on whether Detroit was eligible to file for bankruptcy in the first place.
The city, meanwhile, has moved rapidly through the bankruptcy process and Rhodes is set to begin a confirmation hearing on its overall plan for addressing $18 billion of debt in August.
The appeals court on Wednesday ordered Friedman to revisit Syncora's appeal and make a ruling by July 14.
"The question presented in Syncora's appeal, whether a substantial revenue stream is rightly considered property of the bankruptcy estate, is precisely the type of issue that should be reviewed before the bankruptcy court confirms the plan of adjustment," wrote Judge Julia Smith Gibbons in the court opinion.
"Without a final decision on that question, the city will not know what amount its coffers will contribute to the bankruptcy estate, the creditors cannot know the size of the pie they are being asked to share, and the bankruptcy court cannot be confident that it is considering a legally and financially viable plan... The district court's stay threatens to deprive this court of an opportunity to consider the merits of Syncora's appeal."
Taxes collected from Detroit's three casnios brought the city $9.3 million in May.
http://www.mlive.com/news/detroit/index.ssf/2014/07/fight_over_detroits_casino_rev.html
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