Detroit's plan to get out of bankruptcy cleared a major hurdle on Friday when a Bankruptcy Judge Steven Rhodes approved the cash-strapped city's third attempt at settling costly interest-rate swap agreements with two investment banks, Reuters reported on Friday. The city will pay $85 million to UBS AG and Bank of America unit Merrill Lynch Capital Services, much less than had been proposed on two previous attempts. The banks join a growing list of supporters for Detroit's plan to adjust $18 billion of debt and other obligations. The swaps were used to hedge interest-rate risk on some of the $1.45 billion of pension debt Detroit sold in 2005 and 2006. However, the city's bet that interest rates would rise proved wrong as rates fell along with the city's bond ratings, souring the deal. The previous settlements rejected by the judge had been much higher, at $230 million and $165 million.
