Detroit water bond exchange approved by bankruptcy judge
Detroit can exchange at least $1.67 billion of its water and sewer debt for new bonds, a federal judge ruled today, removing one more hurdle in the city’s path to exiting its record municipal bankruptcy.
The city won approval of the deal in federal court in Detroit, a week before it starts a trial on its plan to cut debt and exit bankruptcy. The decision by U.S. Bankruptcy Judge Steven Rhodes allows the city to buy back or pay off early about 92 percent of the water and sewer bonds it was targeting with a repurchase offer that ended last week.
“It’s a good deal for the city,” Kevyn Orr, Detroit’s emergency manager, told Rhodes in court today.
Should the city succeed this week in selling new bonds to finance the deal, a group of four bond insurers and investors will drop their opposition to the debt-cutting plan when the trial opens Sept. 2. If the sale fails, the city can still go ahead by borrowing money from a unit of Citigroup Inc., Heather Lennox, an attorney for the city, said today in court.
Detroit’s 5.25 percent water bonds due in 2014 climbed 4 percent today to 98.8 cents on the dollar, according to data compiled by Bloomberg.