“We can’t wait forever,” says the receiver’s spokesman, Cory Angell. “We may have to proceed to bankruptcy court.”
The next week or two are crucial in the negotiations between Harrisburg Receiver William Lynch and creditors of Pennsylvania’s capital city.
“We are inches from the goal line,” one observer tells me. “This whole resolution process has taken much, much longer than people have imagined. Everyday that goes by is not bad news as long as discussion go on and it’s progressing.”
By all accounts the process is complicated and cumbersome, involving large and small creditors, several city unions, and the receiver’s staff, to name just a few of the groups of parties.
The problem is there’s not enough money to go around.
“It’s like you have five guys sitting around a table, each saying they’re owed $100, but there’s only $20 at the center of the table,” someone tells me.
The message to creditors is simple: you’re either in a solution, or you’re in bankruptcy.
But, “Every deal is contingent on everyone else agreeing.”
It’s little like a blanket that doesn’t cover everyone on the bed.
“You make one deal, and then the receiver’s staff has to go around the table and ask everyone if that’s agreeable. You have to go back to everyone and say, ‘This is where we’re at. Okay? Okay? Okay? Okay?’ It’s just process. Everyone’s working their asses off to make the circle back around.”
“Every deal (made by the receiver) is contingent,” I’m told. “What if condition B is not accepted? Then you have people saying, I’m not bound by this.”
“The receiver has stopped using the words negotiation and concession. He looks at himself as an umpire, and making things work. He’s got to make the city solvent.”
But, make no mistake, some of the creditors are more equal than others.
Some city creditors are small vendors who are owned just thousands or even hundreds of dollars for supplies or services rendered.
The small creditors aren’t seen as major stumbling blocks to a breakthrough deal.
By all accounts, as I’ve written, the biggest and most important holdout creditor is believed to be the insurer of the defaulted incinerator bonds, Assured Guaranty Municipal, or AGM.
With AGM and the other major creditors, when push comes to shove, there are two possible outcomes:
Outcome 1 – A Deal
A deal, I’m told repeatedly, is the most likely outcome.
Negotiations are moving faster. “You go around the table, you agree in principal.”
By July, odds are, “We’ll have an announced agreement in principle.”
“Then you get to the language.”
If a deal is reached, the details must be made public and, presumably, approved by Harrisburg city council.
But what if AGM’s lawyers won’t agree to a deal and just sit there, and refuse to sign?
If the bond insurer ultimately doesn’t sign off on a deal, that would unquestionably lead to:
Outcome 2 – Bankruptcy Court
What happens if a major creditor such as AGM simply sits at the table but refuses to sign off on a deal? I ask.
“We can’t wait forever,” the receiver’s spokesman, Cory Angell tells me. “The receiver’s team is still in discussion with them (bond insurer AGM).”
But, Angel says, there’s a limit to discussions. “We may have to proceed to bankruptcy court. You have to look at the facts. We have a town to keep running. Police have to be paid.”
If there’s no deal, expect to see the city in bankruptcy court by September of October, I’m told.
There’s simply no money in the city’s coffers to let things drag on into fall. Receiver Lynch can’t allow vital police and public safety services to be pinched by lack of cash flow.
The receiver’s mandate from the state is to provide essential services.
Odds are there will be a deal, everyone keeps telling me.
“The probability that there won’t be (a deal) is only one percent.”
Bottom line: Expect to hear the receiver’s office announce a deal in the coming week, or next few weeks at the latest.
After that, every day, every week without a deal, dragging on in to July, and in to August, means real trouble for the receiver, for Harrisburg, and the incinerator deal.
