Detroit, the biggest U.S. city to file for bankruptcy, is seeking permission to pay UBS AG and Bank of America Corp. $230 million to cancel payments on swaps that threaten the city’s revenue from casino taxes, Bloomberg News reported yesterday. A three-day trial began yesterday before Bankruptcy Judge Steven Rhodes on the city’s request to make the payment as part of a deal to cancel interest-rate swap contracts that have cost it about $4 million a month since July 2009. To pay for the settlement, the city wants Judge Rhodes to let it borrow $350 million. Buying out the swaps will keep the casino taxes, one of Detroit’s best sources of money, from going to the banks, Corinne Ball, a lawyer for the city, told Rhodes today. Creditors led by bond insurer Syncora Guarantee Inc. oppose the settlement, saying it costs too much. The city hasn’t proved it would lose if it sued to cancel the contracts instead of settling with the banks, Syncora said.
