Detroit, Michigan has been forced to navigate the implications of its myriad failed industries and impending bankruptcy for some time now. However, recent financial negotiations suggest that things could soon be looking up for the once prosperous city as it tries to recover.
According to Detroit Free Press, “Investment bank Lazard, which advised retiree negotiators during Detroit’s bankruptcy, slashed about $3 million off its bill, according to a court filing today [January 15].” Lazard experienced a 27 percent increase in revenue in 2013 alone, making it one of the world’s leading independent financial advisory and asset management firms. In addition to what The New York Times calls “big-ticket deals,” the esteemed boutique firm has also been focused on advising Detroit’s retiree negotiators, who hope to find solutions that have a positive financial impact on Detroit.
Ron Bloom, a former member of Barack Obama’s auto task force, has been instrumental in leading negotiations on behalf of Lazard. Detroit Free Press reports that Lazard “helped negotiate a settlement on pension cuts and retiree health care benefits on behalf of the U.S. government-appointed Official Committee of Retirees.” The firm’s work advising the Retiree Committee in Detroit resulted in a bill of $8.44 million, which has now been reduced to $5.56 million after recent negotiations.
Reportedly, this slash in debt signifies the first in a series of similar forbearances and negotiations by law firms, private consultants, and other financial advisory firms. Collectively, advisors to the city and the Retiree Committee charged about $170 million for their services, and Judge Steven Rhodes has since intervened to determine if the fees charged to Detroit are reasonable. Because many of these advisors are now slashing their fees, Detroit will be able to restructure its finances as it tries to recover. The recent financial negotiations “will allow Detroit to slash $7 billion in liabilities and reinvest $1.7 billion over 10 years in services,” reports Detroit Free Press.
Although Detroit’s unprecedented restructuring plan will take years to execute, these recent financial negotiations feel like a definite step in the right direction.