DETROIT (WXYZ) - Bankruptcy Judge Steven Rhodes has approved the Detroit Swaps settlement with two banks, UBS and Bank of America.
The banks will be paid 30 cents on the dollar, or $85 million on a $288 million dollar obligation.
Two of the proposed settlements of $230 million and $165 million were earlier rejected by Judge Rhodes as being too high.
This deal also means these creditors will vote in favor of Detroit's Plan of Adjustment that has been proposed to settle Detroit's $18 billion debt.
The original loans were taken out by Detroit City officials in 2005 in the amount of $1.5 billion to cover unfunded liability in Detroit's two city employee pension systems.
In 2009, the city pledged city revenue from Detroit's three casinos to cover the loan payments.
This settlement allows that revenue, about $15 million a month, to restore city services.
The judge overruled objections to the deal that claimed the city could potentially recover $300 million to $400 million if it pursued litigation over the these loans, but Judge Rhodes said that result was uncertain.
Speaking at the end of his ruling, Judge Rhodes talked about where the Detroit case is in the bankruptcy process.
He says the city can use this deal and support for its Plan of Adjustment as an advantage in ongoing negotiations with creditors and retirees.
The Judge said there is "nothing unusual or unfair" and it is "not inconsistent" with the Bankruptcy Code.
The Judge said the impact of this deal is the City's Plan "may be eligible for confirmation" in a cram down this summer even if no other creditors agree. The Judge said, "now is the time to negotiate.
Not on the eve of confirmation which would be this summer. The Judge also cautioned parties from "orchestrating" a "public relations campaign."
Yesterday, leaders of Detroit pubic safety employee unions held a news conference denouncing terms of pension and employee benefit offers given so far in bankruptcy. The Judge said, "they should give serious consideration" about this procedure.
"It is not about who wins in the court of public opinion."
One attorney in court for the hearing called the Judge's comments "one helluva lecture." Another said it is "ridiculous." Attorneys and some retirees in court for the hearing declined to comment on camera.