Friday, 12 February 2016
Last updated 6 hours ago
Sep 4 2013 | 10:59am ET
Detroit is turning to hedge funds to raise some $350 million to settle swap contracts with Bank of America and UBS.
The city, the largest in American history to file for bankruptcy, asked 14 banks, hedge funds and other lenders for proposals on the debtor-in-possession financing. Most of the money, about $250 million, would be used to settle the swaps, with the rest being set aside to pay for public services, including the police, fire department and blight removal.
"These are all people we have been working with over the months and who have been wanting to make a proposal should we seek DIP financing," Bill Nowling, a spokesman for Detroit's emergency manager, told Bloomberg News.
Detroit has not identified any of the potential lenders.
The DIP financing would be backed by casino-tax revenues currently pledged to the swaps. The deal, which would see Detroit pay as little as 75% of the current value of the contracts, would fall apart without the loan, Nowling said. Cancelling the swaps would save Detroit about $50 million.