$85 million to be paid of $288 million currently owed. That’s the latest agreement (posted below) reached between attorneys for the city of Detroit and two investment banks over the interest rate swaps debt related to the city’s pensions funds.
Bankruptcy Judge Steven Rhodes in the last few months has twice rejected agreements of $230 million and $165 million, sending attorneys back to the mediation room. They emerged on Monday, proverbially, and the city filed a motion asking that Rhodes approve the latest arrangement with UBS AG and Bank of America Merrill Lynch. The deal also includes the banks forgoing casino tax revenues that the city had pledged as collateral in 2009 to avoid defaulting on pension debt payments.
The $85 million is not quite 30 cents on the dollar of the current $288 million obligation.
With Detroit’s debt reportedly totaling $18 billion, the city has millions of dollars in debt restructuring remaining to resolve. But the UBS-Bank of America deal is significant. First, it frees up for the city about $15 million in monthly casino taxes that had been tied to the pension interest swap deal. Second, it sets a benchmark for other negotiations — and eventual settlements — with the city’s other 100,000-plus creditors.
Here’s a roundup of news stories about the deal:
Detroit Free Press: Detroit reaches deal…millions saved by taxpayers
Detroit News: New debt deal could save Detroit $201 million