Detroit secures $275 million in bankruptcy exit financing

Detroit secured a commitment for $275 million in bankruptcy exit financing through Barclays Capital, with city officials saying the interest rates on the bonds it will sell came in lower than expected and with broad interest from the bond markets.

The money is to be used to pay off a $120 million 'quality of life' loan the city took out after filing for bankruptcy, as well as some of the reinvestment plans the city has laid out in its bankruptcy exit strategy that will be subject to confirmation hearings starting next week. In addition, some will be spent to meet terms of deals with creditors under the plan.

Emergency manager Kevyn Orr's office said the bond commitment came after 'a robust process that included expressions of interest from a number of prospective lenders, underscoring the city's viability as an attractive investment.'

The bankruptcy plan of adjustment calls for the city to receive exit financing through financial recovery bonds after it exits Chapter 9 — perhaps as early as October — with the bonds issued by the Michigan Finance Authority.

'Detroit continues to make steady progress in returning to firm financial footing and becoming an attractive place to invest once again,' Orr said. 'We are very pleased to have secured this exit facility and are encouraged by the reception we received from the broader financial community. We look forward to deploying these funds in our ongoing effort to make Detroit a viable and strong American city once again.'

The exit financing announcement came two days after the Detroit Water and Sewerage Department said it received lower than expected interest rates on the sale of nearly $1.8 billion in bonds it sold Tuesday. Some are refinancing bonds and others are new bonds the department will use to fund upgrades to the aging system that serves 4 million people in southeast Michigan. The better bond terms are expected to save the water department $248 million over 27 years.

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