Detroit To File $85 Million Deal With Banks
DETROIT (AP) - The city of Detroit has reached yet another tentative agreement to settle a pension debt with UBS and Bank of America Merrill Lynch and will file the $85 million plan within a few days in federal bankruptcy court, state-appointed emergency manager Kevyn Orr announced Monday.
Judge Steven Rhodes vetoed two earlier tentative deals for Detroit to pay the lenders $230 million and $165 million to settle the debt, incurred in 2009 when Detroit pledged casino taxes as collateral to avoid defaulting on pension debt payments. The city ended up locking itself into high interest rates on bonds, and the deal became too costly when interest rates plunged.
Orr said in a statement Monday that the latest deal balances the needs of the city and its creditors. He said he looks forward to Rhodes’ decision on the proposal.
“We are pleased to have resolved this matter with UBS and Merrill Lynch,” Orr said. “We appreciate the banks’ willingness to work with us to reach a solution that we think balances our goal to provide realistic recoveries to creditors while freeing up critical funds that we can invest to improve the quality of life in Detroit.”
Rhodes has set a June 16 trial on Detroit’s plan to deal with its estimated $18 billion debt and emerge from bankruptcy. Under Detroit’s plan, pension holders could expect to get 70 percent to 90 percent of what they are owed, while many banks would receive as little as 20 percent.
Gov. Rick Snyder is seeking the Legislature’s support for the state to kick in $350 million toward pensions, with private benefactors contributing a similar amount in exchange for protecting the collection of the Detroit Institute of Arts from being sold.
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