Bankruptcy In The USSA: Detroit Bondholders About To Be GM'ed In Favor Of Pensioners

02-01-2014 • http://www.zerohedge.com, by Tyler Durden

Five years later we are about to get a stark reminder that under the superpriority rule of a community organizer for whom "fairness" trumps contract law any day, it is now Detroit's turn to make a mockery of the recovery waterfall. As it turns out, bankrupt Detroit is proposing to favor pension funds at roughly double the rate of bondholders to resolve an estimated $18 billion in long-term obligations, according to a draft of a debt-cutting plan reviewed by The Wall Street Journal.

The breakdown to unsecured stakeholders would be as follows: 40% recovery for pension funds, 20% for unsecured bondholders - all this to the same pari class of unsecured creditors. Because just like in Europe when cashing out on CDS in insolvent nations is prohibited as it would suggest that the entire Eurozone experiment is one epic farce, regardless of how much "political capital" Goldman Sachs has invested in it, so in the US municipal creditors are realizing that in the worst case scenario, they will be layered first and foremost by all those whose votes are critical in keeping this crony administration in power.