Detroit debt deal with banks up for fight

The Detroit News reports:

The first big brawl in Detroit’s bankruptcy case will play out this week when the city’s lawyers try to persuade the judge that two Wall Street banks deserve to cut in front of pensioners and bondholders in the debt payment line.

Emergency Manager Kevyn Orr’s bid to untangle a complicated debt transaction blamed as one of the underpinnings of Detroit’s plunge into bankruptcy could set the stage for the rest of his plan to rescue the city from crippling debt.

His proposal to pay UBS AG and Bank of America at least $250 million to terminate an interest rate swap arrangement that went bad for the city during the recession is opposed by insurers of the debt who stand to lose millions of dollars and retirees owed billions of dollars in promised retirement benefits.

History in the making.