Detroit sought court permission to borrow $350 million to help fund its record municipal bankruptcy, a loan that Moody’s Investors Service Inc. called “unprecedented,” Bloomberg News reported yesterday The city, in a bankruptcy court filing, said that most of the loan would be used to buy out interest rate swaps that have cost the city about $50 million a year. Moody’s, in a report for investors released yesterday, said that the city’s proposed use of financing known as a debtor-in-possession loan is unusual compared to corporate bankruptcies. “The impact of the proposal on the city’s existing creditors, as well the city’s near-term financial position and long-term financial recovery, are difficult to assess at this point given the number of contingencies that remain,” Genevieve Nolan, a Moody’s assistant vice president, said. The annual $12 million payments on the proposed loan would be far less than the $50 million the city would save each year by buying out the swaps, Detroit told U.S. Bankruptcy Judge Steven Rhodes in its filing yesterday.
