(WXYZ) - Detroit Emergency Manager Kevyn Orr has announced that the city has struck a deal with the banks to pay off some controversial debt swaps.
In the settlement, UBS and Merrill Lynch have agreed to support the Plan of Adjustment proposed by the city in exchange for $85 million. In this deal, the termination payment would save the city around $201 million.
The settlement still has to be approved by the United States Bankruptcy Court for the Eastern District of Michigan. The judge has rejected two previous settlements, saying they were too generous to the banks.
This arrangement is a significant drop over the last numbers the city UBS and Merrill Lynch were discussing in January when Judge Steven Rhodes rejected an offer of $165 million made by the banks.
Rhodes also rejected the original offer of $230 million from the banks, calling the debt “possibly illegal” as structured by then mayor Kwame Kilpatrick. That emboldened Orr, who then threatened to sue UBS and Merrill Lynch.
“We are pleased to have resolved this matter with UBS and Merrill Lynch,” said Orr in a press release. “We appreciate the banks’ willingness to work with us to reach a solution that we think balances our goal to provide realistic recoveries to creditors while freeing up critical funds that we can invest to improve the quality of life in Detroit. We look forward to Judge Steven Rhodes’ decision on our proposed settlement, and we hope the ‘swaps’ resolution serves as a model for compromise on other matters related to Detroit’s finances. The vitality of Detroit and the surrounding region demands good faith negotiation and compromise grounded in reality from all sides, and we remain focused on ensuring a strong future for Detroit.”