Detroit reaches water bond restructuring deal -Detroit Free Press

Wed Aug 6, 2014 9:41pm EDT

Aug 6 (Reuters) - The Detroit Water and Sewerage Department said it has reached a deal to refinance up to $5.2 billion in debt, the Detroit Free Press reported on Wednesday.

As per the deal, the city and water department bondholders and companies insuring the bonds agreed to allow Detroit to make tender offers on existing bonds, the newspaper said. (on.freep.com/1sx36cp)

The water and sewage department could not be reached for comment after normal business hours.

Those who agree to exchange their current debt for new bonds will not be able to oppose the city's financial restructuring plan, the Detroit Free Press reported.

If enough creditors approve the plan, then Detroit could force its terms on the creditors who object to it, speeding up the city's bankruptcy case.

Among those opposing the plan are the city's labor unions and pension funds.

Wednesday's deal will allow the city to reissue new bonds at lower interest rates, the Detroit Free Press reported.

Heather Lennox, an attorney for Detroit, suggested on Wednesday that a "major deal" was being worked out during a hearing before U.S. Judge Steven Rhodes, the newspaper said.

The deal will decrease the interest amount needed to be paid in the long run to the water/sewer bondholders, who are legally protected from impairment under Chapter 9 bankruptcy law.

Detroit filed for bankruptcy in July 2013 after decades of dwindling population and a declining manufacturing base left the city of approximately 688,000 struggling to pay its bills. (Reporting by Kanika Sikka in Bangalore; Editing by Lisa Shumaker)

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