The Detroit City Council yesterday approved four bond issues to raise cash to pay settlements with some city creditors, according to the city clerk's office, offering a glimpse at how Detroit intends to finance its exit from the biggest-ever municipal bankruptcy, Reuters reported yesterday. The council signed off on the public sale or private placement of $5.5 billion of water and sewer revenue refinancing bonds that would fund the tender of existing bonds and raise additional cash for improvements. Bondholders have an Aug. 21 deadline to sell their water and sewer bonds back to the city, which will not proceed with the deal unless enough bonds are tendered. The council also approved $632 million of financial recovery bonds secured by the city's limited-tax general obligation pledge, which makes the repayment of the bonds a priority for the city's general fund budget. Proceeds from that issue would be allocated to certain unsecured creditors, including $218 million for a voluntary employee beneficiary association (VEBA) retiree healthcare plan for general city workers, $232 million for a VEBA for police and fire personnel, and $33.6 million for the Downtown Development Authority.
http://www.reuters.com/article/2014/08/15/usa-detroit-bankruptcy-bonds-…
In related news, a bond insurance company fired back at Detroit's attempt to invalidate $1.45 billion of pension debt, claiming in a court filing on Wednesday that it was "fraudulently" led to guarantee payments on the debt, Reuters reported yesterday. Financial Guaranty Insurance Co., which insures more than $1 billion of the city's pension certificates of participation (COPs), filed a counterclaim against Detroit asking the U.S. Bankruptcy Court to dismiss the city's lawsuit seeking to void the debt. If the city prevails in its lawsuit, FGIC, one of Detroit's biggest hold-out creditors, asked the court for restitution and damages from the city or its pension funds that would be determined at a trial. Detroit, which is working its way through the biggest municipal bankruptcy in U.S. history, filed the lawsuit in January, claiming that the sale of the COPs in 2005 and 2006 violated borrowing limits imposed on the city under Michigan law. The COPs were issued during the term of former Mayor Kwame Kilpatrick, now in prison on federal corruption charges.
http://www.reuters.com/article/2014/08/14/usa-detroit-bankruptcy-fgic-i…