Go here to read what might appear to be a bit of innocuous news about the Detroit bankruptcy. (Go here, here, and here to read additional recent posts.) Reuters reports that the insurer of one of Detroit's bond issues, Ambac Assurance, has reached a deal with the city on the terms of its payout under the city's plan of adjustment.
The details of the deal aren't as important as the fact that the deal was made. As Detroit cuts deals with one after another of its constituent communities of creditors, it become less likely that any holdouts will prevail in a fight over confirmation of the plan. Thus, and in particular, Syncora and Financial Guaranty Insurance Company, which have taken a hard line against the plan on the ground that it discriminates unfairly, are becoming more isolated. And let's face it, no matter how strong their legal argument may be (and I think it's strong, download my article Municipal Bankruptcy: When Doing Less Is Doing Best explaining why here), from a pragmatic point of view it will seem to be crying about sour grapes and fighting "the tide of history" as our President might remark.
Dividing your enemies is a time-honored way for a weaker power to defeat a strong coalition of opponents. Kevyn Orr has learned his history well.
The details of the deal aren't as important as the fact that the deal was made. As Detroit cuts deals with one after another of its constituent communities of creditors, it become less likely that any holdouts will prevail in a fight over confirmation of the plan. Thus, and in particular, Syncora and Financial Guaranty Insurance Company, which have taken a hard line against the plan on the ground that it discriminates unfairly, are becoming more isolated. And let's face it, no matter how strong their legal argument may be (and I think it's strong, download my article Municipal Bankruptcy: When Doing Less Is Doing Best explaining why here), from a pragmatic point of view it will seem to be crying about sour grapes and fighting "the tide of history" as our President might remark.
Dividing your enemies is a time-honored way for a weaker power to defeat a strong coalition of opponents. Kevyn Orr has learned his history well.
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