DETROIT Dec 24 The city of Detroit reached an
agreement Tuesday with two banks to end a costly interest-rate
swap agreement, a significant step as the city negotiates with
creditors to put together a plan to exit bankruptcy.
The terms of the agreement were not immediately released,
but the details were announced on Tuesday to U.S. District Judge
Gerald Rosen, the chief mediator in the bankruptcy case, a court
statement said. The deal must still be approved by the U.S.
bankruptcy judge overseeing the case, Steven Rhodes.
The deal was reached after two days of mediation this week
led by Rosen.
Detroit had initially secured a $350 million loan from
Barclays PLC, of which about $230 million would be used
to end the swap agreements with UBS AG and Bank of
America Corp's Merrill Lynch Capital Services at 75
cents on the dollar. The remainder of the cash was slated to be
used to improve services in the city, which is hampered by $18.5
billion in debt and the largest municipal bankruptcy in U.S.
The swaps had been intended to hedge interest rate risk for
a portion of $1.4 billion of pension debt Detroit sold in 2005
A spokesman for Bank of America declined comment. UBS could
not be reached immediately for comment.
Rhodes last week encouraged Detroit to negotiate better
terms with the banks after he halted a hearing at which the city
was seeking approval of the deal.
"We are very pleased and hope that this is a change that
Judge Rhodes is happy with," Detroit attorney David Heiman, of
the law firm Jones Day, said on Tuesday outside the federal
courthouse in Detroit, the Detroit News reported.
A spokesman for Detroit's emergency manager, Kevyn Orr, did
not immediately respond to a request for comment.