Detroit has reached an “important settlement” with some creditors as it negotiates ways to get rid of billions of dollars of debt, according to court documents filed on July 15, though details of the agreement haven’t been released.
The disclosure was made in a lawsuit involving the city, an insurance company and a bank. The document doesn’t reveal any details but said Detroit no longer needs a restraining order in the case, which involves a dispute over taxes and casino revenue.
“The city reached in principle an important settlement with certain of its creditors late Friday afternoon, which we understand will be executed,” attorney Deborah Kovsky-Apap said in the court filing.
Bill Nowling, spokesman for state-appointed emergency manager Kevyn Orr, said the settlement involves swap agreements.
Detroit has pledged money from casino revenue as collateral to avoid defaulting on past pension debt payments. The swaps are backed by insurer Syncora Guarantee Inc., which acts as a trustee and makes payments from casino revenue to parties involved in the swaps.
The settlement referred to in July 15 court filing primarily involves Bank of America Merrill Lynch and some other entities, Nowling said.
“We have a deal in principle with the swap counterparties, but it’s not finalized yet,” said Nowling, who added that details could not be released until the deal is signed.
Earlier this month, a county judge granted Orr a temporary restraining order against Syncora, which the city said was improperly withholding $11 million a month in casino payments and taxes.
Orr, a bankruptcy expert, was hired by the state in March to fix Detroit’s chronic budget deficit and solve the city’s long-term debt of about $17 billion.
Separately, in his latest quarterly report to state officials, Orr said Detroit remains in “dire” condition and could run out of money by December if more action isn’t taken to defer payments or conserve money.
The 11-page report doesn’t mention the possibility of bankruptcy.
Detroit stopped making some debt payments in June while Orr asked creditors to take about 10 cents on every dollar that’s owed. Private negotiations have been ongoing.
Orr represented automaker Chrysler LLC during its successful restructuring. He is four months into an 18-month assignment as emergency manager. He’s in charge of a city that has lost a quarter of its population since 2000.
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