Beleaguered Detroit turns to bankruptcy expert for help
Detroit's emergency manager Kevyn Orr proud to help iconic American city
Bankruptcy expert Kevyn Orr has been selected to turn the cash-strapped and struggling Midwest City of Detroit around. Governor Rick Snyder says he chose Orr to be Detroit's emergency manager. Orr represented automaker Chrysler LLC during its successful restructuring.
Calling Detroit a "storied American city," emergency manager Kevyn Orr said that "We can rise from the ashes. This is a beautiful city and a wonderful state that gave me my start. I feel compelled to do this job."
"We can rise from the ashes," Orr said. "This is a beautiful city and a wonderful state that gave me my start. I feel compelled to do this job."
Orr said when he met with Snyder, he called the manager job "an unsung hero task." He asked the governor why he would bother to help the city, and Snyder's response was: "Kevyn, it's the right thing to do and it's the right time to do it."
Detroit was at onetime an iconic American city, symbolic of the nation's industrial strength with its fabled auto industry. After years of fleeing populations and economic downturn, Detroit is now the largest U.S. city to have its finances placed under state control.
Detroit has lost a quarter-million people during the last decade. The city also remains saddled with a $327 million budget deficit and more than $14 billion in long-term debt. Detroit has remained solvent on a month-to-month basis with the help of bond money held in a state escrow account. In addition, Detroit also has instituted mandatory unpaid days off for many city workers.
It was de3termined by a board of experts that Detroit would have had to either increase revenues or decrease expenditures -- or both -- by about $15 million per month for three months starting in January to "remain financially viable."
Coupled with underfunded city services such as police and fire departments and the absence of legitimate turnaround plans from Mayor Dave Bing and the City Council, ultimately forced Snyder to appoint an emergency manager.
Orr's hiring followed a release by Bing that Detroit selected Jones Day as the city's restructuring counsel. The international firm that has more than 2,400 attorneys on five continents has relevant experience in major disciplines needed to assist Detroit in implementing a successful restructuring strategy.
"The experience of the Jones Day law firm will be a valuable asset as we proceed with our plan for restructuring the city of Detroit," Bing said.
"The firm is well-regarded as experts in restructuring and insolvency, both with and without court supervision," James McTevia, president of a Michigan-based firm that specializes in turnaround management.
"I have worked with the firm many times over my 50 years as a bankruptcy receiver/trustee and also out of court. I am sure their goal is to keep Detroit out of the bankruptcy court."
With Orr's appointment, Detroit became the sixth Michigan city placed under state oversight. Pontiac, Flint, Ecorse, Allen Park and Benton Harbor already have managers, as do public school districts in Detroit, Highland Park and Muskegon Heights.
© 2014 - Distributed by THE NEWS CONSORTIUM
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