Detroit has 3rd agreement to settle bad debt deal

The Detroit Free Press reports:

The City of Detroit will seek court approval of a new settlement with two banks that could erase a controversial financial transaction that helped drive the city into Chapter 9 bankruptcy.

The city has negotiated new terms on a settlement with UBS and Bank of America Merrill Lynch over swaps, after U.S. Bankruptcy Judge Steven Rhodes rejected two previous agreements.

The transaction, which was brokered by Mayor Kwame Kilpatrick’s administration in 2005, involved interest-rate swaps. The swaps secured a steady interest rate of 6% on $1.4 billion in debt that was used to eliminate Detroit’s unfunded pension liabilities at the time.