(Adds comments from Detroit water/sewer officials, details on
potential bond refinancing)
DETROIT Aug 22 The Detroit Board of Water
Commissioners agreed on Friday to repurchase nearly $1.5 billion
of water and sewer revenue bonds tendered by investors by a
deadline on Thursday.
Detroit, which filed the biggest-ever municipal bankruptcy
last year, launched the tender offer on Aug. 7 with the hope of
getting back enough of the $5.2 billion of outstanding debt
through a tender offer and replacing it with lower-cost bonds
through a refinancing.
Pending approval from U.S. Bankruptcy Court, about $1.8
billion of refinancing bonds would be sold in the municipal bond
market on Tuesday, according to Nicolette Bateson, chief
financial officer of Detroit's water and sewerage department
The debt refunding will raise money to pay for the tendered
bonds, as well as $162 million for construction projects, she
said, adding that savings from the refinancing are projected at
about $241 million over 26 years.
Detroit turned to the tender offer after most water and
sewer bondholders rejected the city's plan to adjust $18 billion
of debt in voting this summer.
DWSD Director Sue McCormick said the voluntary bond tender
offer accomplished two goals.
"The first was to execute a tender/refinancing transaction
that achieved meaningful dollar savings for our customers," she
said in a statement. "The second was to seek an open market
alternative to the impairment in the city of Detroit's plan of
If the tender is accomplished, any remaining bonds that were
not tendered would continue to be paid by the city under
If it fails to be completed, call protection would be
eliminated or interest rates would be reduced on "impaired"
outstanding water and sewer bonds under the debt adjustment
plan. Those bonds make up about $2.2 billion of the existing
$5.2 billion of debt.
Judge Steven Rhodes, who is overseeing the city's bankruptcy
case, will take up the city's motion for the court to approve
the bond tender at a hearing on Monday. On Sept. 2, the judge
will commence a key hearing to determine if the city's debt
adjustment plan is fair and feasible.
The refinancing bonds would be issued through the Michigan
Finance Authority and priced by lead underwriter Citigroup.
Detroit has set a Sept. 4 closing date for the deal.
The DWSD said it plans to pursue future refinancings of more
than $1 billion of bonds that become callable within the next
(Reporting by Peter Suciu in Detroit; Additional reporting by
Karen Pierog in Chicago; Editing by Meredith Mazzilli, Leslie
Adler and Ken Wills)