Several major creditors are expected to contest a new settlement between Detroit and two global banks to pay off a disastrous debt deal when a trial over the proposed settlement resumes today, the Detroit Free Press reported today. The city agreed on Dec. 24 to a new settlement with UBS and Bank of America Merrill Lynch to pay off a pension debt interest-rate transaction called “swaps” with $165 million in newly borrowed cash. The new deal, brokered in a federal mediation session with U.S. District Chief Judge Gerald Rosen, amounted to a $65 million discount over a previous settlement of $230 million. The original swaps settlement collapsed last month after Bankruptcy Judge Steven Rhodes questioned the city’s decision to pay $230 million to settle the $293 million swaps transaction, suggesting that he deal might be too generous to the banks. Bond insurer Ambac Assurance, which has been arguing for months that the swaps transaction was illegal and the settlement was a bad deal, yesterday filed a fresh objection to the new settlement.
