Detroit yesterday filed a request for proposals for $350 million in unprecedented financing, the city emergency manager's office said, Reuters reported yesterday. Detroit is the first large U.S. city to seek debtor-in-possession (DIP) financing after asking for bankruptcy court protection. The city plans to use about $250 million to terminate a complicated swaps deal related to previous bonds issued to finance pension debt, said Bill Nowling, press secretary for Detroit's state-appointed emergency manager, Kevyn Orr. About $100 million would "provide the city with adequate liquidity throughout the restructuring case to start reinvesting in Detroit today," Nowling said. It would be a line of credit the city could draw from, but it may not use all of it, he said. Nowling also said that Orr plans to use proceeds from the financing to invest in "quality of life" improvements for Detroit's nearly 700,000 residents.
For more information about DIP financing, be sure to pick up ABI's Debtor-in-Possession Financing guide, and for further analysis of municipal distress and the situation in Detroit, be sure to read Municipalities in Peril: The ABI Guide to Chapter 9, Second Edition.