WHEN: TONIGHT, THURSDAY, JULY 18TH
WHERE: CNBC'S "THE KUDLOW REPORT"
Following is the unofficial transcript of a CNBC interview with Detroit Emergency Manager Kevyn Orr tonight on CNBC's "The Kudlow Report." Following is a link to the video of the interview on CNBC.com: http://video.cnbc.com/gallery/?play=1&video=3000184076.
All references must be sourced to CNBC.
KEVYN ORR: Yeah. Yes, we did, Larry--
(RECORDING NOT TRANSCRIBED)
LARRY KUDLOW: All right, so that was our conversation and-- and all I'm saying is that--
KEVYN ORR: Yes, it was--
LARRY KUDLOW: I know you went through what you had to go through, and I appreciate it very, very much. I also appreciate you comin' this show tonight. I know you're very, very busy--
KEVYN ORR: Thank you--
LARRY KUDLOW: Let me just ask you, sir, why'd you file today?
KEVYN ORR: Walk, you know,Larry, I've been saying-- even back then I was saying, look, I-- I came in saying I wanna open a sincere olive branch. And then I said, you know, we wanna reach out and have negotiations with our stakeholders. We wanna try to find away to do this consensually.
But I also always said if we can't do that, we're gonna use every tool available to us to us to get at this crushing debt so that we can start restoring services to the citizens and create a path to sustainability for this city. And unfortunately-- in our collective estimation it got to a point where we're-- we have got to make some very difficult s-- decisions given the time frames that I have to work with and given the work-- a lot of work-- that needs to be done. And that's why we decided that it was time to move forward.
LARRY KUDLOW: All right. The Detroit Free Press is reporting that you made a deal today with two creditors-- the Bank of America and UBS for debtor-in-possession financing to keep the city open. I wanna ask you (A) if that is the case? (B) If you could just tell us a little bit about that? And (C) was that what drove you today to actually make the formal bankruptcy filing?
KEVYN ORR: Well, I'm gonna stay away from whether or not there was a deal regarding dip--debtor-in-possession financing, but we have been negotiating with some of our creditors to free up some cash flow and also relieve some of our debt and release some liens-- so these are secured interests and some cases-- release some liens so that we'd have the kinda cash that we need to start immediately restoring services.
We're negotiating with other creditors, too, and we'll negotiate with other stakeholders to get to a point,if we can, where we can reach relen-- resolution with anybody who's willing to come in. So the reality is, Larry, there-- there are efforts being made,there's progress being made, but we had to draw the line somewhere.
LARRY KUDLOW: Yeah. No, I understand that. I just wanna go through it again. They're-- they're reporting$344 million swap with $255 million for debtor-in-possession, it would give Detroit access to $11 million a month-- in casino revenues just to keep the basic services open. I'm assuming fire, police, things of that sort. Is that the case?
KEVYN ORR: Sure. Sure.
LARRY KUDLOW: All right--
KEVYN ORR: Well, it's the case that we-- we have-- we have an agreement in principle to get to our casino revenue and relieve some of our secured debt. That is the case.
LARRY KUDLOW: All right.Thank you for that. Now let's go through it. You've got-- what-- 30 to 90 days-- in this bankruptcy court. Do you know which judge it's gonna be? Who's gonna make this determination?
KEVYN ORR: We don't. Unlike a lot of other cases where there's a blind draw, in the case of Chapter 9, the chief judge for the circuit makes the assignment to the judge. And we don't know who our judge is gonna be yet. So we're-- we're gonna find that out hopefully in the next day or so.
And then, well, the 30 to 90 days, you're talk about is generally the eligibility-- sort of analysis that we'll go through, and we believe very strongly that all the requirements-- you know, our negotiations of good faith and the insolvency of the city have met that standard. So we're-- we're prepared to go forward.
LARRY KUDLOW: All right. Kevin, let me just ask a couple of things. You're very experienced in highly regarded-- bankruptcy or financially
KEVYN ORR: You're very kind.
LARRY KUDLOW: No, I always have been. You have a great-- reputation. There is a rumor, though, and I'd like you to talk about it. That-- at the last minute-- it might have been last week, I can't confirm that-- that you did speak to the White House, you did talk to presidential advisor, Valerie Jarrett, about some kind of bailout, and you were turned down. Can you confirm or deny that rumor?
KEVYN ORR: No, I can't confirm or deny that rumor.
LARRY KUDLOW: So do you say you did not talk to Ms. Jarrett?
KEVYN ORR: I can't confirm or deny that rumor. All I'm saying, Larry, is we reached out the a number of different people, but we've gotta solve this problem on our own. This is a problem that has been more than 60 years in the making. There's $18 billion of debt total.
Even if we took $200 million a year out of a $1 billion budget, which we can't do because we'd shut down every pothole when it plowed another street of snow or anything else, it would take 68 years to pay off that debt. Even just $11 billion in unsecured debt,that's almost 52 years to pay off the debt. I'd be dead. We can't wait any--longer, Larry.
LARRY KUDLOW: I mean--Detroit is a formerly great and proud city. There's no two ways about that--the heartland of America. When you look back on this, as you've immersed yourself in these financial discussions, what is it that brought this city down? Was it in fact the United Autoworkers? Was it in fact the municipal unions? Somebody told me you got 35 some odd municipal unions. Is-- was it the public unions and the private union that brought Detroit down?
KEVYN ORR: No, I-- you know,I still think Detroit is a great and proud city. I mean if you come to Detroit-- and I invite you to do so, Larry-- if you look from downtown out to midtown, it's thriving. I mean our-- we're downtown leasing. We're 97% leased.
We have a number of great--as you know-- a number of great institution and patron and matrons that support the city. Our foundation community has been strong in the city. So I feel very strongly, have a great deal of affinity for Detroit.
The thing that we've gotta get away from is the crushing debt that we're carrying around on our backs, and I'm-- you know, there-- there are enough books and reports and analyses out there about what brought Detroit to the position that it's in, the decisions that have been made, some of the corruption that it had to deal with in-- in--past years. But I'm really looking forward to get this city on a path for sustainability, to grow and deliver services so it can continue to get back to the great city that it still is and thrive.
LARRY KUDLOW: Let me just ask one more and then I will let you go. We appreciate your time very, very much.Last evening on the show we had a discussion about unsecured lenders, municipal bondholders, GO.. bondholders-- which I favor, by the way. They should be unsecured in a situation like this.
But the argument was that you made it-- you tried to make a deal for .10 or .20 on the dollar for the bondholders, for the pension holders, for the benefit-- healthcare benefits and so forth. Did anybody take that deal? Did anybody say, "Let's step up tothe plate and help Detroit?" Can you give kudos to anybody?
LARRY KUDLOW: Well, let me say this. I think in the coming days and weeks we'll may be able to-- to publish some of the settlements that we're working on even as we work. And I mean even this afternoon. The other thing about that is, you know, one of the benefits of bankruptcy is generally there are two types of creditors.
There are those that are secured, and in our proposal-- our June 14th proposal-- we said, hey, we're gonna pay our secured debt, okay. We're gonna do that. But we also said for those that are unsecured, we're gonna treat you with the same treatment you would get in a bankruptcy forum, because that's what the law dictates.
And I recognize all the discussion about GO bonds and the-- and the moral hazard and the inherent covenant that's involved in municipal financing, but the reality is that'sagainst a stark reality of the marketplace and the reality that you-- you get the benefit of the bargain that you went into. So there's some folks that we'reworking with. We hope to have more deals to come in over the transom, and there's some that we hope that even in this process we can get to.
LARRY KUDLOW: Well, you could be sure that the federal-- or whatever-- bankruptcy judge is not gonna be any easier, and in all likelihood will be much tougher than you'll be and that the governor will be. So maybe you can make some of those deals ahead of time.Anyway, Kevyn Orr, thank you for coming back on the show. I wish all the best of luck to make Detroit great again. Now--
KEVYN ORR: Thank you so much, Larry. I appreciate the time.
LARRY KUDLOW: All right, you got it.
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