A U.S. bankruptcy judge on Monday approved Detroit's proposal to repurchase nearly $1.5 billion of existing water and sewer revenue bonds tendered by investors and to refinance the debt to save money, Reuters reported yesterday. The ruling by Hon. Steven Rhodes clears the way for the sale of about $1.8 billion of refunding bonds to pay for the tender and raise $162 million for new projects. Treatment of the city's $5.2 billion of outstanding water and sewer bonds was a big hole in Detroit's plan to adjust $18 billion of debt after most investors in those bonds rejected the plan earlier this summer. Four insurance companies that guaranteed payments on the bonds agreed to the deal. Objections by holdout creditor Syncora Guarantee Inc. were rejected when the judge agreed that the bond insurer lacked standing because it does not insure nor own any of the bonds. Detroit expects the refinancing will cut annual debt-service costs and result in savings projected at about $241 million over 26 years. While the current water and sewer bonds are rated junk, the city hopes the refinancing bonds will be rated higher and plans to insure some of the debt. On Sept. 2, the judge will commence a hearing to determine if the city's debt-adjustment plan is fair and feasible.
