(Recasts with direct sourcing, adds quote from judge,
April 2 A U.S. bankruptcy judge on Wednesday
approved Detroit's plan to borrow $120 million from Barclays PLC
to improve services in the cash-strapped city.
Judge Steven Rhodes, who is overseeing Detroit's historic
bankruptcy case, overruled objections by city creditors who took
issue with the timing and structure of the loan.
"This court has previously held the city is service-delivery
insolvent," Rhodes said.
Detroit has said it plans to use some of the loan proceeds
on public safety improvements.
The loan deal emerged early last month after a larger loan
was rejected in part by the judge in January. The previous loan,
backed largely by city casino tax revenue, included $165 million
that Detroit wanted to use to pay two investment banks to end
soured interest rate swap agreements that contributed to the
city's filing of the biggest municipal bankruptcy in U.S.
history in July. Those swaps were used to hedge interest rate
risk on some Detroit pension debt.
In January, Rhodes ruled that the $165 million price tag was
too high for the broke city.
On Thursday, the judge will hold a hearing on Detroit's
latest plan to terminate the swaps at a deeply discounted cost
of $85 million. Given the smaller amount of money and the fact
it would be paid over time, the city has said it would no longer
need to include it in the borrowing.
Under the $120 million loan, Detroit would no longer pledge
the casino tax revenue, which is crucial to helping the city get
back on its feet as it restructures its $18 billion of debt and
other obligations. Instead, the city is pledging income tax
revenue and the proceeds of asset sales, except for property of
the Detroit Institute of Arts.
The loan deal received previous approval from the Detroit
City Council and Michigan's Local Emergency Financial Assistance
(Reporting by Karen Pierog; Editing by James Dalgleish and Dan