NEW YORK--(BUSINESS WIRE)--The following statement is issued by Kramer Levin Naftalis & Frankel LLP on behalf of the following holders of $1,015,270,000 Certificates of Participation (“COPs”) insured by Financial Guaranty Insurance Company (“FGIC”): Dexia Crédit Local and Dexia Holdings, Inc., Panning Capital Management, LP, on behalf of funds and accounts managed by it, Monarch Alternative Capital LP, on behalf of funds and accounts managed by it, Bronze Gable, L.L.C., Aurelius Capital Management, LP, on behalf of its managed entities, Stone Lion Capital Partners L.P., on behalf of funds and accounts managed by it, and BlueMountain Capital Management, LLC, on behalf of funds and accounts managed by it (collectively, the “Ad Hoc COPs”).
Over the last several days, the Ad Hoc COPs have actively participated in mediated negotiations among the Ad Hoc COPs, FGIC and the City of Detroit (the “City”) with the goal of settling FGIC’s and the Ad Hoc COPs’ objections to the City’s Chapter 9 bankruptcy plan and the attendant claims of the Ad Hoc COPs against FGIC. By yesterday afternoon, the parties had reached an agreement in principle on the basis of the attached term sheet (the “Term Sheet”) (a copy of which will be filed on the City’s bankruptcy docket and available at https://www.kccllc.net/Detroit (the “City’s Bankruptcy Website”)). Unfortunately, last evening FGIC informed representatives of the Ad Hoc COPs that it was unable to accelerate payments on the policies of one of the three series of FGIC-insured COPs without the consent of a third party.
FGIC and the City announced in Bankruptcy Court this morning of October 16, 2014 that (i) they had reached an agreement among each other, which is reflected in a revised term sheet available on the City’s Bankruptcy Website (Docket No. 7963) and (ii) they intend to proceed with a settlement on substantially the terms contemplated by the Term Sheet, except that none of the three series of FGIC-insured COPs would be accelerated. All FGIC-insured COPs holders would be provided with the option of participating in the terms of that settlement, which FGIC is currently drafting. As of the date hereof, the Ad Hoc COPs have not accepted these modified terms and reserve all rights as against the City and FGIC. The Ad Hoc COPs are open to resuming discussions to bring about a comprehensive resolution to the matter.
Although not reflected in the Term Sheet, the deal dishonored by FGIC also contained the following provisions:
• FGIC would begin the monetization process of the development rights for the real property located in the City upon which is presently situated the Joe Louis Arena and the Joe Louis Arena garage at least six months prior to the expiration of FGIC’s ability to develop said parcel or a major capital call.
• FGIC agreed to sell C Notes provided by the City as part of its consideration to FGIC and COPs holders at or near par within two years.
• The parties agreed to appoint a “restricted representative” to oversee the liquidation of all assets including the JLA development rights on behalf of the COPs, who would be paid by FGIC. Such fees for a restricted representative would be capped at $100,000 annually.
• Parties that contribute capital would be provided with a “Preferred Return” of 10% cumulative annual return, compounded annually or, in certain circumstances, a “Super Preferred Return” of 15% cumulative annual return, compounded annually.