Kevyn Orr, a University of Michigan Law School graduate and
former partner at the law firm Jones Day, has been selected by
Governor Rick Snyder as Detroit's Emergency Financial Manager
(EFM). As EFM, Orr will be responsible for overhauling
Detroit's finances and city services, including negotiating
with creditors and unions to restructure the city's obligations
and reduce its budget deficits and long-term debt. While Orr has
stated he hopes to avoid a Chapter 9 bankruptcy filing, he has
described this assignment as the "Olympics of
While at Jones Day, Orr was part of the team which led Chrysler
through its bankruptcy and subsequent sale to Fiat. As part of that
team, Orr faced similar challenges to those he is likely to face as
Detroit's EFM. Chrysler's emergence from bankruptcy
required negotiating significant concessions with bondholders and
unions in order to reduce Chrysler's overall debt. Now, as part
of Fiat, Chrysler is experiencing dramatic sales growth and
success. Detroit also has significant debt obligations to its
bondholders and large legacy liabilities for union retirement and
health benefits, which will likely require even more extensive
negotiations to resolve.
A complex financial situation is not the only challenge which
Orr faces as EFM. The appointment of an EFM in Detroit has been
politically sensitive and is still the subject of protests within
the city and the state. Orr has already faced the political issues
involved in large restructurings during the Chrysler bankruptcy,
where he was called to testifying before the House of
Representatives regarding the decisions to close multiple
dealerships. Everyone in Michigan is hopeful that Orr's
experience from the Chrysler bankruptcy will help the city of
Detroit emerge from the Olympics of Restructuring with a gold
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The ability to "surcharge" a secured creditor’s collateral in bankruptcy is an important resource available to a bank¬ruptcy trustee or chapter 11 debtor in possession, particularly in cases where there is little or no equity in the estate to pay administrative costs, such as the fees and expenses of estate-retained professionals.
In Official Committee of Unsecured Creditors v. UMB Bank, N.A., 2013 BL 317120, the court held that unamortized original issue discount arising from fair-market-value debt exchanges should not be disallowed as unmatured interest under sec¬tion 502(b) of the Bankruptcy Code.