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Detroit Ch. 9 May Set Pension Precedent 20130805-NEWS--0001-NAT-CCI-CD_-- 8/2/2013 6:28 PM Page 1 ® www.crainsdetroit.com Vol. 29, No. 31 AUGUST 5 – 11, 2013 $2 a copy; $59 a year ©Entire contents copyright 2013 by Crain Communications Inc. All rights reserved Page 3 We are trying “ to be fair, but we are trying to Detroit Ch. 9 may set deal with the realities that have been coming here for a long time. pension precedent Kevyn ”Orr Orr:Law doesn’t shield retirees from cuts BY CHAD HALCOM Tools of political influence: AND KIRK PINHO MORE ON DETROIT’S BANKRUPTCY CRAIN’S DETROIT BUSINESS Opinion, cash Q&A: Felix Rohatyn was there when New York City NATHAN SKID/CDB A new committee will take shape in the com- was on the brink, and he has some ing weeks to represent more than 23,000 re- advice, Page 24 HIGHLIGHTS OF KEVYN ORR’S PLANS tirees in court and negotiate their future bene- Video: Kevyn Orr on good-faith fits as a class of creditors in Detroit’s Chapter 9 bargaining, communicating with retirees The city is working to restructure all debt, with and why the focus isn’t just on health care, bankruptcy. www.crainsdetroit.com/video health care and pension liabilities at the top of But do the retirees have any special legal CARTER SHERLINE the pile. claims that set them apart as creditors? may well make the call that sets the new legal Negotiations with creditor groups are ongoing Detroit Emergency Manager Kevyn Orr told and a cram-down plan (involuntary imposition of standard on retirees’ creditor rights at U.S. Bank- Crain’s in an interview last week that he be- a reorganization plan over the objection of some ruptcy Court. No other municipal bankruptcies classes of creditors) so far isn’t planned. lieves federal bankruptcy doctrine prohibits have advanced to a court precedent for Detroit or the city from treating its 9,750 employees and Preserving funding for public safety, IT, blight others to follow when it comes to pensions, al- removal and economic development remain 23,500 retirees differently from any other unse- though retirees preserve contractual rights un- priorities. cured creditors — or even from each other. der a reorganization plan in Jefferson County, Is FlockTag it in the The city plans to secure a contract or multiple “We don’t see any doctrine in the bankruptcy Ala., that’s up for court review this week. contracts to outsource trash collection, recycling code that allows you to discriminate,” he said. Orr is awaiting a new actuarial analysis of customer-loyalty game? and waste disposal. Proposals are due by Sept. 10. “In fact, most of the doctrine of the code pro- the city’s two employee pension fund obliga- A plan to regionalize the Detroit Water and hibits you from discriminating against classes of tions from Seattle-based Milliman Inc. and said Sewerage Department under a new authority creditors unless their behavior is unreasonable. he hopes to have completed reports in hand lat- Inside remains under development by the city and So we treated them as we think federal law re- er this month. His attorneys said in court Fri- surrounding counties. quires them to be treated. We are not discrimi- day that they could submit a reorganization Medicaid alternatives may The city is switching employees to a high- nating.” plan by year’s end, three months ahead of cover fewer and cost more, deductible health plan. That means Judge Steven Rhodes, who or- dered the retiree committee formation on Friday, Page 4 See Pensions, Page 24 Oakwood creates post- acute care unit, Page 6 Mars CEO aims Wayne County sees VC at shoppers bigger as better in Griffon Ventures plans foreclosure auction BY GARY ANGLEBRANDT downtown Detroit move GLENN TRIEST Ken Barnett of Mars Advertising SPECIAL TO CRAIN’S DETROIT BUSINESS said he is talking with Bedrock BY TOM HENDERSON IS FLOCKTAG IT? The Wayne County treasurer’s office, swim- Real Estate about small spaces CRAIN’S DETROIT BUSINESS Ann Arbor firm in downtown Detroit. ming in tax foreclosures, is planning to bundle wants to expand hundreds of dilapidated tax foreclosure proper- Mars Advertising Inc. is growing beyond ad- into Groupon $100,000 per deal, according ties into one package at its fall auctions. vertising. Ken Barnett, CEO of the Southfield- territory, Page 3 to Ethan Goodman, Grif- The treasurer’s office has experimented with DETROIT 2.0 based ad agency, has founded a venture capi- fon’s managing director. bundling in the past, for cases such as subdivi- tal firm to invest in technologies that serve the Mars will serve as “our institutional angel Although the city of Detroit sion projects that fell apart. But this would be declared bankruptcy this shopper marketing niche Mars specializes in. investor,” said Goodman. the first time it has bundled such a large num- summer, the entrepreneurs of It’s a growth curve that may eventually Members of the Mars management team will ber of properties. Motown remain enthusiastic. lead the longtime fixture in Southfield — its get equity stakes in Griffon’s portfolio compa- It’s a deliberate strategy to best position the Find out who is coming, who is 70,000-square-foot headquarters is on Tele- nies in exchange for acting as mentors and properties for the future. The point, a county of- staying and who is building in graph Road north of 10 Mile — to move to helping entrepreneurs connect with Mars ficial says, is to make the bundle so unattrac- our special issue “Detroit 2.0,” downtown Detroit to be closer to all the entre- clients, which include Wal-Mart Stores Inc., Hall- tive and unwieldy that the properties don’t sell. which is being delivered with preneurial activity going on, said Barnett. mark Cards Inc., Pepperidge Farm Inc. and Camp- Many of the properties have dilapidated struc- this week’s issue of Crain’s, bell Soup Co. Additional coverage can be The VC, Griffon Ventures, was founded last tures that should be demolished, said Dave Szy- “We’re asking our management team to found at crainsdetroit.com. year. It won’t have a fund, but will invest on a deal-by-deal basis, typically between $50,000 and See Mars, Page 25 See Auction, Page 21 Year-round exposure. High-quality leads. Exclusive content. NEWSPAPER 20130805-NEWS--0002-NAT-CCI-CD_-- 8/2/2013 1:19 PM Page 1 Page 2 CRAIN’S DETROIT BUSINESS August 5, 2013 MICHIGAN BRIEFS Genesee County delays bond sale week affirmed a lower court ruling that 12 graduates of the Lansing- after Detroit shakes up markets With merger, Perrigo to wear the green to earn green based Thomas M. Cooley Law School Genesee County is home to are not entitled to a tuition refund Flint, which also is under a state- When Perrigo Co. announced last week that it both companies. The companies said the merger because they couldn’t find satisfac- appointed emergency manager. In- planned to merge with the Irish pharmaceutical com- would leave existing Perrigo investors with 71 per- tory jobs, The Associated Press re- vestors in the $3.7 trillion munici- pany Elan Corp. in an $8.6 billion transaction, much of cent ownership. ported. The grads claimed they pal market have speculated that the coverage centered on the plan to move Perrigo’s Another reason Perrigo moved on Elan: Royalties were misled by the school’s em- Detroit’s treatment of its general- headquarters from Allegan, the company’s home on Tysabri, a multiple sclerosis drug whose sales ployment statistics. obligation debt could set a prece- since 1887, to Dublin for tax purposes. And for good have been growing at a 19 percent compound annual Ⅲ Grand Rapids-based Crystal dent for other distressed cities in reason, according to the numbers and wire reports. growth rate from 2008 through 2012. Flash last week extended the reach Michigan. An Irish HQ would allow Perrigo’s corporate prof- Elan emerged as a leader in biotechnology and in of its fuel distribution network to its to be taxed at 12.5 percent, one of the lowest rates finding a treatment for Alzheimer’s disease in the Southeast Michigan by acquiring in Europe, whereas the U.S. levies 35 percent. Perri- 1990s but nearly collapsed when initial trials of C. Barron & Sons in Monroe, For merged firms, the first rule of go Chairman and CEO Joe Papa said the move to Tysabri failed and it got caught up in an accounting MLive.com reported. It’s the sixth marketing: Do More Good Ireland should add more than $150 million in net scandal in 2002. acquisition in the past 18 months profits annually because of lower taxes and efficien- Perrigo is already the largest maker of generic for Crystal Flash, which sold its Crain’s readers have stumbled cies from combined operations. drugs for major U.S. retail chains, including Wal- convenience stores a few years ago. upon some rather (pause while edi- In the transaction, Perrigo would create an entity greens and Wal-Mart. It has expanded rapidly, with ac- Ⅲ The Associated Press reports tor thinks of word that is suitably called New Perrigo that would acquire shares of quisitions in Israel, Britain, Mexico and Australia. that the fifth edition of Grand diplomatic without being unctu- Rapids’ annual ArtPrize competi- ous) intriguing corporate names tion will have something new on over the years. And if you are one Representatives for the ampersand, Ⅲ Kalamazoo Valley Community Col- cery chain was forced to cut work- the program this fall: an Internet who thinks that logic is the first ca- @ symbol and virgule (aka “slash”) lege, Bronson Healthcare Group and ers along with pay and benefits.
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