Bankruptcy Judge Denies Detroit’s Swaps Deal

Source: Robert Snell / The Detroit News

Detroit — U.S. Bankruptcy Judge Steven Rhodes has denied a deal that would have allowed Detroit to pay two banks $165 million to terminate a troubled pension debt deal blamed for pushing the city into bankruptcy.

The settlement would have ended a pension deal backed by ex-Mayor Kwame Kilpatrick and generate cash that will bankroll $120 million worth of improvements to city services and public safety.

“It’s just too much money,” Rhodes said.

The city wants to pay UBS AG and Bank of America’s Merrill Lynch Capital Services $165 million to end an interest rate swaps arrangement tied to $1.44 billion in money borrowed in 2005-06 to prop up Detroit’s pension funds. If approved, Detroit will pay off the banks from a $285 million loan and spend the balance on city services.

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