March 27 Detroit dropped a key requirement in
its latest version of an agreement on costly interest rate swaps
with two investment banks, which was filed in court late
Under the agreement, UBS AG and Merrill Lynch
Capital Services, a unit of Bank of America Corp. would
no longer have to support the financially hobbled city's plan to
restructure its debts.
Other creditors had said they could be subject to a "cram
down" if the banks officially approved the plan. Under Chapter 9
of the federal bankruptcy code, once a city wins agreement from
a single class of creditors whose interests are impaired by
bankruptcy it can then impose settlement terms on other classes
In the agreement, though, the banks state they will not
object to a debt-adjustment plan.
On Monday, Detroit will submit to the bankruptcy court an
amended adjustment plan, along with a revised disclosure
statement that responds to various "informal requests for the
inclusion of additional information," the city said in a filing
Bankruptcy Court Judge Steven Rhodes has scheduled a hearing
for April 4 on the plan and its treatment of retirees.
The city's emergency manager, Kevyn Orr, is seeking to wind
down the expensive interest rate swaps used to hedge pension
debt. Under the agreement, the city would pay the banks $42.5
million each to settle swaps estimated at around $285 million.
Rhodes has rejected previous proposals from the city and
banks to end the swaps as too expensive for the city.
Detroit filed for bankruptcy protection last July, the
largest municipal filing in U.S. history.
(Reporting by Lisa Lambert; Additional reporting by Karen
Pierog in Chicago; Editing by Leslie Adler)