Detroit, sometimes known as “Motor City”, is the most populous city in the U.S. state of Michigan. It is also the largest city on the United States-Canada border. Detroit filed a record $18 billion municipal bankruptcy in July.
According to a court filing in the city’s bankruptcy, the interest-rate swaps have cost taxpayers more than $200 million since 2009. Bloomberg Business Week has reported that Detroit has agreed to pay $77.6 million to UBS AG and to Bank of America Corp.’s Merrill Lynch unit. The settlement is a 70 percent reduction in the amount the city was liable for under a 2009 agreement. Detroit owed $288 million under the swap agreement, according to the Washington Post.
Attorneys for the city reported that the payments will be made over time, rather than in a lump sum. In addition, “The settlement also contains an agreement by the swap counterparties to vote their impaired claims in favor of a plan of adjustment,” the city of Detroit wrote in its court filing, according to Bloomberg News.
In January, Judge Steven Rhodes rejected a proposal by the city to pay $165 million. Detroit blames decades of economic decline for the city’s inability to pay creditors and still provide basic services. The restructuring of the debt however will help Detroit be able to carry on the city’s basic operations while managing future expenses as well.
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