A federal bankruptcy judge’s rejection of a deal between Detroit and its creditors will stall the City’s access to casino funds it needs to restore services and speedily exit bankruptcy. In the big picture, however, the decision may benefit Detroit.
“For Detroit, the road in and out of U.S. bankruptcy court is paved with casino money,” write Kevin Pierog and Joseph Lichterman.
Revenue from Detroit’s casinos - its third largest and most reliable funding source - has been tied up since 2009 when, as part of a disastrous derivatives swap deal, the revenue was pledged as collateral to creditor banks. This allowed the City to avoid making what would have been a devastating $400 million payment to the banks but now leaves the much needed casino revenue out of reach.
"’Every day that we don't have access to casino revenue, we cannot make the necessary investment in this city to provide for the health, safety and welfare of the citizens,’ [City Emergency Manager Kevyn] Orr said in a deposition last August, shortly after bankruptcy was declared.”
“[Judge Rhodes] put the casino money at the center of debate by declaring that Detroit probably did not have a right to pledge that money as collateral in the first place under state law. He suggested Detroit might win in a bid to invalidate the swaps altogether if a court were to find the city had no right to pledge the casino money.”
Read the full story: Detroit's Path Into And Out Of Bankruptcy Is Paved With Casino Money
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