DETROIT Dec 13 The Detroit Public Lighting Authority and Michigan Finance Authority on Friday said they sold $60 million of bonds to jump start improvements to the city's ailing public lighting infrastructure.
The interim borrowing, which was privately placed with Citibank, will have a floating interest rate. Last week, U.S. Bankruptcy Judge Steven Rhodes approved the financing plan over the objection of some of the city's creditors. .
The bond sale is the initial phase of the lighting authority's financing plan, which calls for backing about $153 million of bonds with $12.5 million in Detroit's annual utility tax revenue. Those bonds, which will used in part to retire the interim debt, will be issued through the Michigan Finance Authority in 2014.
"The closing of this transaction marks the completion of the first step in our integrated financing and lighting system strategy," Public Lighting Authority Director Odis Jones said in a statement. "We can now accelerate construction of the lighting program, a critical first step in improving these services throughout the city."
Detroit's state-appointed emergency manager, Kevyn Orr, has estimated that about 40 percent of the street lights in the city do not work. Earlier this month the city was ruled bankrupt in federal court.
The Public Lighting Authority resulted from Michigan legislation passed late last year.
In a report released on Friday, Moody's Investors Service said Rhodes' decision to allow the bond sales was not good for Detroit bondholders because it "increases the probability that future operating revenues will be diverted to new creditors, diminishing resources available to pay existing debt holders."