Michigan OK's bonds to fund Detroit's bankruptcy plan
Michigan officials on Friday signed off on four bond issues totaling $1.1 billion that would fund Detroit's exit from the biggest-ever municipal bankruptcy.
The Local Emergency Financial Assistance Loan Board said proceeds from the issues "will assist the city in addressing several settlements and claims against the city, as it nears the end of its bankruptcy process."
The bond sales, which were previously approved by the Detroit City Council, are contingent on the city winning confirmation of its debt adjustment plan in U.S. Bankruptcy Court, according to the board, which consists of three top state officials, including Michigan's treasurer.
One deal that was previously sized at $275 million has been raised to up to $325 million and would be initially purchased by Barclays Capital. Proceeds from that deal would be used in part to retire a $120 million city loan with Barclays from earlier this year.
Detroit officials, who regained control of the city government from state-appointed Emergency Manager Kevyn Orr on Thursday, said that Orr had to continue to oversee the bankruptcy case until it is over to satisfy terms of the $120 million loan.
Other deals approved by the state board were for $632 million, $55 million and $88.4 million. The latter would fund creditor recoveries related to Detroit's $1.4 billion of pension certificates of participation as part of a deal the city struck with bond insurer Syncora Guarantee Inc earlier this month. COPs creditors would get a 13.9 percent recovery.
Financial Guaranty Insurance Co, which like Syncora insured the pension debt, has not reached a deal with the city and remains the last major hold-out creditor in the bankruptcy case.
Proceeds from the bond issues would also raise money to pay other unsecured creditor claims, including those for limited-tax general obligation bonds, according to the state board.
Detroit, which entered bankruptcy court in July 2013 with $18 billion of debt and obligations, could exit as soon as next month. Judge Steven Rhodes, who is overseeing the historic case, put the confirmation hearing on the city's debt adjustment plan on hold starting September 19, to give FGIC time to retool its case. The judge, who must decide if the plan is fair and feasible, is scheduled to restart the hearing on Monday.