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Loan Board Approves $350 Million in Lending Deal For Detroit

A state board says the city of Detroit may borrow up to $350 million to pay off investment swaps that went sour.

But the deal still needs the approval of a federal bankruptcy judge.

The Michigan Public Radio Network’s Rick Pluta reports.

State officials say the deal to refinance the debt, if it’s approved, will free up money the city can use for police, fire, lighting and other services. The international bank Barclays would lend the city the money to pay off two other banks. But federal bankruptcy Judge Steven Rhodes has not given his OK. He says the city should push for better terms to terminate the deal with Bank of America and UBS that turned out to be a financial disaster. It costs the city about 5 percent of its annual revenue, and state and city officials say it played a big part in driving Detroit to bankruptcy. The arrangement was made in 2005, while Kwame Kilpatrick was mayor. If the banks don’t agree to renegotiate, the city could also try to challenge the legality of the arrangement.

Rick Pluta is Senior Capitol Correspondent for the Michigan Public Radio Network. He has been covering Michigan’s Capitol, government, and politics since 1987. His journalism background includes stints with UPI, The Elizabeth (NJ) Daily Journal, The (Pontiac, MI) Oakland Press, and WJR. He is also a lifelong public radio listener.
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