DETROIT and its major hold-out creditors were ordered Tuesday into mediation, just a week before a key federal court hearing is to start in the city’s historic bankruptcy case.

    The move followed a Monday hearing before U.S. Bankruptcy Judge Steven Rhodes on Detroit’s objection to bond insurer Syncora Guarantee Inc.’s allegations of improper conduct and conflicts of interest in the case by court-appointed mediators.

    U.S. District Court Judge Gerald Rosen, the chief mediator in the case, set a Wednesday and possibly Thursday mediation session over US$1.4 billion of certificates of participation (COPs) that Detroit sold in 2005 and 2006 to pay its pension liability.

    The session will include bond insurers that guaranteed payment on the COPs — Syncora and Financial Guaranty Insurance Co.

    The city, which defaulted on the debt in June 2013 and is seeking to void it altogether, is offering a recovery of only pennies on the dollar on the COPs in its plan to adjust US$18 billion of debt. Meanwhile, the plan calls for much higher recoveries for city retirees resulting from the so-called grand bargain in which philanthropic foundations, the Detroit Institute of Arts and the state of Michigan would contribute money to ease pension cuts.(SD-Agencies)