Judge strikes down deal between Detroit and Wall Street banks
DETROIT (AP) - Detroit Bankruptcy Judge Steven Rhodes announced his ruling over whether Detroit can settle so-called swaps agreements with Wall Street banks Thursday.
Rhodes says the cost to Detroit is too high to put the issue behind the city. He said the court looked at every way to approve it.
This likely means they go back into negotiations.
The judge also said the court will carefully scrutinize a plan of adjustment still to be filed by Emergency Manager Kevyn Orr.
Rhodes did rule Detroit can proceed with a new loan of $120 million because that money is needed for city services.
The settlement at hand proposed they city pay 67 cents on the dollar and gave access to $15 million a month in revenue from the three Detroit casinos that were pledged as collateral.
Emergency manager Kevyn Orr testified during the hearing on this matter and said the casino revenue is needed to improve city services.
The payoff would've been $165 million. The amount due is $247 million.
Other Detroit creditors including the two city pension funds objected to the settlement because they stood to be paid much less.
Detroit faces an $18 billion debt and Detroit City Retiree Pensions are underfunded by $3.5 billion.