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Detroit Plan Favors Pensioners Over Bondholders

Similar creditors are usually treated the same in a bankruptcy, so plan to give pension funds twice as much may not hold up in court.

By Chris Christoff, Bloomberg, Brian Chappatta, Bloomberg | Updated on January 31, 2014

Detroit’s pensions would get more than twice what creditors who loaned the city money for those funds would receive under a proposal to restructure its $18 billion of debt.

The draft plan given to creditors this week by Emergency Manager Kevyn Orr offers different recovery rates for classes of unsecured creditors. Pension funds would get 45 to 50 cents on the dollar, though retiree health-care liabilities would recoup just 13 cents, according to the plan.

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