DETROIT (Reuters) - Syncora Guarantee, which insured payments by Detroit on some of its interest-rate swaps, on Thursday appealed a bankruptcy court order that allowed Detroit continued access to casino revenue that the city says it needs to avoid running out of cash.
Syncora had tried to block Detroit from accessing an estimated $11 million in monthly tax revenue from the city’s three casinos, claiming it had a lien on the money, which had been used as collateral since 2009 to secure the city’s interest-rate swap agreements. Detroit’s emergency manager, Kevyn Orr, and one of his top consultants said in sworn depositions that the casino revenue is key to city’s survival.
Syncora on Thursday filed an appeal in U.S. district court in Detroit of an August 28 ruling by Bankruptcy Judge Steven Rhodes granting the city access to the casino funds.
Detroit filed the largest municipal bankruptcy in U.S. history in July, and it is struggling to overcome more than $18 billion in debt and other obligations.
Syncora is also one of several bond insurers and other creditors that are objecting to a deal Detroit struck with Merrill Lynch Capital Services and UBS AG to end interest-rate swap agreements.
Detroit wants to end the agreements at a discount and free up the contested casino revenue, which was used as collateral for the swaps. The city hopes to use the funds to arrange so-called debtor-in-possession financing that would allow Detroit to settle with the swap counterparties and make investments in the city.
Rhodes was scheduled to hold hearings on the proposed agreement last month but postponed them indefinitely at Detroit’s request to give the city more time to negotiate with its bond insurers and other creditors. The hearings have not yet been rescheduled.
Reporting by Joseph Lichterman