Detroit reaches settlement with key creditor in bankruptcy case

A key opponent of Detroit’s plan to reduce its debt has reached a final settlement with the city, a significant step that could allow the municipality to emerge from bankruptcy protection.

In a court filing Monday, lawyers for Syncora Holdings Ltd.’s Syncora Guarantee Inc. said the company had reached “a comprehensive settlement” to end its objection to the city’s debt-cutting plan.

Proceedings in the Chapter 9 case were adjourned last week when Syncora, a bond insurer, and Detroit announced they had reached a tentative settlement and needed more time to complete their negotiations.

Final details of the settlement are expected to be announced in court Monday. Syncora will reportedly collect between 20% to 25% of the approximately $200 million it is owed.

Detroit had an estimated $18 billion in long-term obligations when it filed for bankruptcy protection in July 2013, making it the largest municipal bankruptcy in U.S. history.

The Syncora action means Detroit is a step closer to asking Judge Steven Rhodes to approve its sweeping plan to slash more than $7 billion in liabilities and reinvest $1.4 billion in services over 10 years.

During the negotiations, Syncora’s lawyers accused mediators of favoritism. Judge Rhodes ordered the insurer’s attorneys to prove why they should not be sanctioned and said they should apologize, though he wouldn’t order it.

On Monday, Syncora issued a formal apology.

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