As its history-making Chapter 11 bankruptcy timeline nears its end, the city of Detroit has made a deal with one of its largest creditors in a move intended to push the city toward post-bankruptcy revival.
On Thursday, Oct. 16, Detroit, along with the city’s Chapter 11 bankruptcy attorneys, agreed to demolish the Joe Louis Arena, which had been home to the Detroit Red Wings hockey team up until this point, and its parking garage. The land will be handed over to Financial Guarantee Insurance Co. (FGIC), to which the city owes approximately $1 billion, and will be re-purposed into a new development featuring a hotel, riverfront condominiums and retail shops, the Wall Street Journal reports.
The deal will help Detroit and its Chapter 11 bankruptcy attorneys ensure that the city’s debt-cutting plan is manageable for both the city and its creditors. In a typical settlement, surrendering property such as land during a Chapter 11 bankruptcy helps repay creditors and is fairly commonplace.
In return for the land, as well as $152 million in city notes and $19.7 million in credits it can use to buy city parking assets or real estate, FGIC will drop its objections to Detroit’s Chapter 11 bankruptcy and taxes readjustment plan, Reuters reports.
According to the Wall Street Journal, FGIC considers the location of the Joe Louis Arena to be a prime spot for its planned development, as it is close in proximity to Detroit’s Cobo convention center that hosts the North American auto show each year.
With FGIC’s settlement with Detroit and the city’s Chapter 11 bankruptcy attorneys made, experts predict the city’s debt readjustment plan is coming close to an end.
“A settlement with FGIC, as the last major holdout creditor, certainly provides substantial assistance to the city in obtaining approval of its monumental bankruptcy plan,” John Hutton, an attorney at Greenberg Traurig who is not involved in the bankruptcy, told Reuters. “The court must still independently determine that the plan is feasible, and must still find that the city has a reasonable likelihood of achieving its financial projections and performing its obligations.”