The deal comes after the judge overseeing
Detroit's historic bankruptcy case rejected a $350 million loan
that would have raised $230 million for the city to end interest
rate swaps. Those swaps were used to hedge interest rate risk on
some Detroit pension debt.
The city said earlier this week it had reached a new agreement
with Merrill Lynch Capital Services and UBS AG to end the swaps
for $85 million. Two prior proposed deals with bigger price tags
were rejected by U.S. Bankruptcy Judge Steven Rhodes.
If the new agreement is approved by Rhodes, it would give
Detroit access to revenue from casino taxes that had been
pledged as collateral for the swaps. It could also give the city
leverage in efforts to win court approval for the city's plan to
restructure its debt.
Under terms of the agreement with Barclays, which also requires
court approval, Detroit would no longer pledge the casino tax
revenues, which are crucial to helping the city get back on its
feet as it restructures its debt. Instead, collateral would
consist of income tax revenue and the proceeds of asset sales
except for property of the Detroit Institute of Art.
(Reporting by Steven C. Johnson in
New York; editing by Lisa Shumaker)
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