Committee for unsecured creditors appointed in Detroit bankruptcy

DETROIT Mon Dec 23, 2013 3:01pm EST

A woman walks through the Midtown neighborhood of Detroit, Michigan December 3, 2013.
CREDIT: REUTERS/JOSHUA LOTT

(Reuters) – An independent federal trustee helping to administer Detroit’s historic bankruptcy case on Monday named a committee to represent interests of the unsecured creditors as the city prepares to submit a plan to the court to readjust its debt.

United States Trustee Daniel McDermott named five creditors to the committee: Detroit’s two pension funds, which are its largest unsecured creditors, bond insurer Financial Guaranty Insurance Company, contract administrator Wilmington Trust Company and an individual creditor, Jessie Payne.

The committee was created in order to ensure all unsecured creditors are ably represented.

“Its primary power… is to have a stronger voice than an individual creditor, while actively participating in the negotiation of a plan for the adjustment of the debtor’s financial obligations,” said a December 6 letter sent to all prospective committee members by the U.S. Trustee.

The city is not obligated to pay for the committee’s lawyers or advisers, and a spokesman for Emergency Manager Kevyn Orr did not immediately respond when asked if Detroit would pick up the tab.

U.S. Bankruptcy Judge Steven Rhodes appointed a creditors’ committee of retired workers in August to represent the more than 20,000 city retirees throughout the bankruptcy proceedings. Detroit is paying the retiree committee’s expenses.

Detroit filed the largest municipal bankruptcy in U.S. history on July 18, and it has more than $18 billion in debt. Detroit has until March 1 to submit its plan to readjust its debt, but Orr has said the city plans to enter its proposed plan to the court in early January.

(Reporting by Joseph Lichterman; Editing by Dan Grebler)

(This story corrects first sentence to reflect the committee was named by the bankruptcy trustee, not the judge)