A federal bankruptcy judge approved Detroit's plan to settle a bad multimillion-dollar pension debt deal with two banks, a key to restructuring the city 's debt.
Judge Steven Rhodes signed off on the agreement on Friday to pay $85 million to UBS and Bank of America.
"The amount is reasonable and quite fairly compromises the counter-parties' claims," the judge said of the deal in which each bank will get $42.5 million secured from casino revenue. It will be paid off in monthly, $4.2 million installments, Rhodes said during a hearing.
Rhodes said the plan decreases the amount Detroit owes to the banks and extends the amount of time the city has to pay what is owed. Also, it doesn't need a loan to pay it off, he said.
Rhodes had denied earlier proposals for $220 million and $165 million settlements. Detroit had pledged casino tax revenue in 2009 as collateral to avoid defaulting on pension debt payments, which allowed the city to get fixed interest rates on pension bonds with the banks. But the deal became too costly when interest rates plunged.
The swaps deal is key to Emergency Manager Kevyn Orr's plan to restructure Detroit's debt. The two banks have said they will support Orr's plan. Saddled with $18 billion debt, Detroit filed for bankruptcy protection last July, the largest municipality to do so in U.S. history.
- The Associated Press