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Fri December 20, 2013
Board approves $350 M loan deal for Detroit
A state board says the city of Detroit may borrow up to $350 million to pay off investment swaps that went sour. But the deal still needs the approval of a federal bankruptcy judge.
State officials say the deal to refinance the debt, if it’s approved, will free up money the city can use for police, fire, lighting and other services.
The international bank Barclays would lend the city the money to pay off two other banks.
But federal bankruptcy Judge Steven Rhodes has not given his OK. He says the city should push for better terms to terminate the deal with Bank of America and UBS that turned out to be a financial disaster. It costs the city about 5% of its annual revenue, and state and city officials say it played a big part in driving Detroit to bankruptcy.
The arrangement was made in 2005, while Kwame Kilpatrick was mayor. If the banks don’t agree to renegotiate, the city could also try to challenge the legality of the arrangement.