The Bermuda corporate parent of a bond insurer at the centre of controversy over Detroit’s $18-billion bankruptcy hearings, has disclosed they could face difficulties if the judge rules against them.

Their New York-based bond insurer subsidiary — Syncora Guarantee — is said to be a key obstacle blocking Detroit from emerging from bankruptcy, with proceedings set to begin on August 14.

And their lawyers kept up the pressure ahead of the hearing, telling the Detroit News yesterday it sympathises with retirees who face cuts in Detroit’s bankruptcy case but still wants access to the personal financial information of 20,000 retired city workers.

The Detroit news organisation, and other Detroit area media, describes Syncora Guarantee as a Bermuda bond insurer, although it is a New York company owned by Bermuda-based Syncora Holdings Ltd.

Syncora Guarantee is fighting a plan to limit pension cuts at the expense of other unsecured creditors. That part of the battle goes to the judge this week.

Meanwhile, Bermuda-based Syncora Holdings has stated that adverse outcomes or rulings in the proceedings could have a material adverse effect on the company’s liquidity and financial position.

The company, which lists Education and Economic Development Minister Dr Grant Gibbons as a director, stated: “ ... the company has potential Detroit-related exposure of $246.8 million, which represent bond insurance policies relating to general obligation bonds.

“ ... the city of Detroit’s recently filed plan of adjustment provides for minimal recoveries to the holders of the company’s insured bonds and further challenges the validity of the company’s insured obligations.”

Syncora is not the only Bermuda company connected to the Detroit bankruptcy.

But fellow litigant Assured Guaranty reached a tentative settlement with Detroit with respect to the treatment of the Assured Guaranty-insured unlimited tax general obligation bonds (UTGO Bonds) in the city’s proposed plan of adjustment.

The company said in a statement: “Assured Guaranty’s agreement with the city provides for the city’s continued payment of approximately 78 percent of future UTGO debt service, confirmation of both the secured status of the UTGO Bonds and the existence of a valid lien on the city’s pledged property tax revenues (UTGO Tax Revenues), a finding that the UTGO Tax Revenues constitute “special revenues” under the US Bankruptcy Code, and the provision of additional security for the UTGO Bonds in the form of a statutory lien on, and intercept of, the city’s distributable state aid.

“After giving effect to post-petition payments made by Assured Guaranty on the UTGO Bonds, the settlement results in a minimum ultimate recovery of approximately 74 percent on the UTGO Bonds, with the ability to achieve a higher ultimate recovery rate over time if other debt creditors’ recoveries reach certain specified thresholds.

“The settlement is subject to a number of conditions, including confirmation of a plan of adjustment that implements the terms of the settlement described above and the execution of definitive documentation.

“Currently, Assured Guaranty’s net par exposure with respect to Detroit’s outstanding UTGO Bonds is approximately $127.8 million. As always, investors that own Detroit UTGO Bonds insured by Assured Guaranty can be certain they will continue to receive timely payment of scheduled principal of, and interest on, their bonds in full in accordance with the terms of the Assured Guaranty bond insurance policies.”

Elsewhere, the Detroit Free Press has reported that Syncora Guarantee has subpoenaed two of Detroit’s most prominent businessmen, Dan Gilbert and Roger Penske.

Syncora Guarantee filed in bankruptcy court notices of the subpoenas, which command Mr Gilbert and Mr Penske to appear in July at the downtown Westin Book Cadillac for separate depositions. Their testimonies — Mr Penske on July 1 and Mr Gilbert the next day — will be video recorded.

The court filings do not indicate specifically the nature of the topics they will be asked to address.

Both have supported various aspects of the city’s turnaround efforts. They also are on the city’s list of witnesses it expects to call during this summer’s hearing on Detroit’s plan for exiting bankruptcy, which is scheduled to start August 14.

Mr Gilbert, founder of Quicken Loans and owner of the NBA team, Cleveland Cavaliers, is co-chair of Detroit’s new blight task force. About $456 million in federal money and from other sources has been identified to help address Detroit’s more than 84,000 blighted or near blighted structures.

Auto racing mogul Mr Penske was among donors who helped the city get new police cars last year. Mr Penske also chairs the board of directors for the M1 rail project.

Mr Penske told the Free Press in May that he’s confident Detroit’s bankruptcy will leave the city and the region better off.