The city of Detroit, with financial help from the state, plans to demolish the home of the Detroit Red Wings and give the land to a creditor for development as part of a major settlement in the city's bankruptcy case, lawyers said Thursday.
The deal was disclosed in court where Judge Steven Rhodes has been holding a trial to determine if Detroit's plan to get out of bankruptcy is fair and feasible for the long run. It was the largest bankruptcy filing by a city in U.S. history.
A bond insurer with a $1 billion claim, Financial Guaranty Insurance, was one of the last critics still standing after months of settlements between Detroit and other creditors. But the land deal now puts FGIC, as it is known, on the sidelines and moves the trial closer to completion.
The Red Wings of the National Hockey League have played in city-owned Joe Louis Arena along the Detroit River since 1979 but already are planning to move to a new home a few miles away in 2017. The arena and a parking garage would be demolished, giving Financial Guaranty nearly nine acres for a hotel, condominiums, office space or retail development.
The state of Michigan has agreed to provide $6 million for demolition, which likely would start in 2017. The land is considered to be a valuable parcel because it's near Cobo Center, Detroit's downtown convention hall.
It's a "turning moment for this area of Detroit," said Corrine Ball, a lawyer for the city who gave details in court.
Financial Guaranty Chief Executive Timothy Travers said the bond insurer believes in "Detroit's long-term revival prospects."
The deal was completed around 2 a.m. Thursday, and the judge held up proof: a photo of the negotiators that was emailed to him.
Rhodes said the trial would resume Tuesday. He still needs to hear from his court-appointed expert, Marti Kopacz, who's based in Boston and has participated in hundreds of financial restructurings.
Detroit is shedding $7 billion of debt, cutting pensions of thousands of retirees by 4.5 per cent and ending city-paid health insurance for retirees. More than $1 billion would be spent on improving services over the next decade.
Separately, emergency manager Kevyn Orr, who took the city into bankruptcy last year, told the judge that law firms and other outside professionals working on the city's case will be reducing fees by $5 million. It wasn't immediately known how much Detroit has paid so far.
"It sounds like the right thing to do," Rhodes said.