March 6 (Reuters) - Detroit said in a court filing on Thursday it had reached an agreement with Barclays PLC for a $120 million loan that would allow it to invest in services and speed its path out of bankruptcy.
The deal comes after the judge overseeing Detroit’s historic bankruptcy case rejected a $350 million loan that would have raised $230 million for the city to end interest rate swaps. Those swaps were used to hedge interest rate risk on some Detroit pension debt.
The city said earlier this week it had reached a new agreement with Merrill Lynch Capital Services and UBS AG to end the swaps for $85 million. Two prior proposed deals with bigger price tags were rejected by U.S. Bankruptcy Judge Steven Rhodes.
If the new agreement is approved by Rhodes, it would give Detroit access to revenue from casino taxes that had been pledged as collateral for the swaps. It could also give the city leverage in efforts to win court approval for the city’s plan to restructure its debt.
Under terms of the agreement with Barclays, which also requires court approval, Detroit would no longer pledge the casino tax revenues, which are crucial to helping the city get back on its feet as it restructures its debt. Instead, collateral would consist of income tax revenue and the proceeds of asset sales except for property of the Detroit Institute of Art.