Detroit Strikes New Swap Accord with Banks

If approved, settlement will get bankrupt city out of $288 million in swaps contracts originally bought to protect pension plan against rising interest rates.

Detroit agreed to pay $77.6 million to UBS AG and Bank of America Corp.’s Merrill Lynch unit to end interest-rate swaps that have cost taxpayers more than $200 million since 2009, according to a court filing in the city’s bankruptcy.

The settlement, which is a 70 percent reduction in the amount the city was liable for under the 2009 agreement, will release Detroit from claims by the banks and provide “greater certainty with respect to the city’s cash flows and liquidity,” Detroit’s attorneys said in a filing yesterday seeking approval for the accord from U.S. Bankruptcy Judge Steven Rhodes. The payments will be made over time, rather than in a lump sum, the lawyers said.

Copyright 2016 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Comments

Advertisement. Closing in 15 seconds.