Detroit Proposal For $350 Million Loan Approved
DETROIT (WWJ/AP) - A Michigan loan board has approved Detroit’s proposal for up to a $350 million loan from Barclays Capital to help pay off some pension debt.
The plan was approved Friday and is expected to get Detroit out of a swaps deal with UBS and Bank of America. About $230 million of the funds will be used to fully pay off a complicated $1.4 billion deal with the banks to cover city pension debt. The rest will be used on city services.
The city pledged its casino tax revenue in 2009 as collateral to avoid defaulting on past pension debt payments. The swaps allowed Detroit to get fixed interest rates on pension bonds with the two banks.
Detroit retirees and pensioners opposed the deal.
Meantime, the judge overseeing Detroit’s bankruptcy is urging an appeals court to stay on the sidelines at this stage.
Judge Steven Rhodes on Dec. 3 said Detroit is eligible to fix its finances in bankruptcy. In a court filing Friday, he says this isn’t the time for the city and creditors to be tied up by “piecemeal appellate litigation.”
Unions, pension funds and retirees want to overturn Rhodes’ critical decision allowing the bankruptcy case to proceed. They’re especially upset that the judge says pensions aren’t shielded from possible cuts.
Rhodes says private mediation sessions to reach agreements are ongoing. He recommends the appeals court consult chief mediator Gerald Rosen as it considers whether to act on an appeal.
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