Forefront | Blog
Back to the Drawing Board
Not a big surprise today that Judge Rhodes asked Kevyn Orr to go back to the drawing board on his swap settlement. The beauty of bankruptcy is that it levels the playing field for creditors in terms of understanding the deals that are being made and fairness to all who have similar claims. Hence, no cutting in line in terms of settlement or claims on assets. If the City is pledging future revenues and sales of assets to the swap holders, the other creditors should be expected to object to understand what it does to the payment of their claims. Breaking swap agreements is generally not an economic transaction – unless the alternatives of employing the cash required to settle the existing obligation can be redeployed in a more economic fashion. It appears the City may have an economically justifiable circumstance but the creditors have a right to know how this impacts their claim settlement and if a better deal can be reached. Again, the speed of the process should be secondary to the fairness to the creditors.
