WASHINGTON Aug 6 The city of Detroit is zeroing in on financing for its exit from bankruptcy and intends to have a committed lender in coming weeks, its lawyers told Bankruptcy Judge Steven Rhodes on Wednesday.
The city interviewed a small group of lenders about a $300 million loan on Tuesday and expects to receive a second round of bids based on those meetings in the next few days. It intends to confirm the lead lender by the start of the hearing to confirm the bankruptcy plan on Aug. 21, according to city attorneys.
The exit financing will likely be laid out in an amended version of Detroit's plan for adjusting $18 billion of debt and exiting the largest municipal bankruptcy in U.S. history.
Last month, Detroit's consultants, Miller Buckfire & Co, solicited underwriters for a $300 million loan, of which up to $200 million could be tax exempt, according to a term summary.
The court-appointed expert witness, Martha Kopacz, has warned that the assumed interest rate for the loan - 6 percent - was low for the type of financing. She also has said the city could suffer a cash shortage without the loan, and in turn struggle to recover from bankruptcy.
"In the event that this financing is unavailable to the city on reasonable terms, is significantly lower in terms of facility amount, or is otherwise different than the assumptions in the (plan), it is unlikely the city will have sufficient liquidity to operate and satisfy its obligations," she wrote in a report last month.
Rhodes emphasized throughout Wednesday's hearing that the city's leadership, including Mayor Mike Duggan, must be willing to uphold Detroit's financial commitments.
"I would only stress to you that, since it's the mayor that's going to be implementing this plan, the mayor support not only any specific proposal for exit financing but the concept in general," he said.
(Reporting by Lisa Lambert; Editing by Dan Grebler)