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Syncora Guarantee Inc. threatened to put another obstacle in the way of Detroit’s efforts to cut debt through bankruptcy by saying it may oppose the city’s plan to pay $85 million to end interest-rate swaps, Bloomberg News reported yesterday. Syncora, which insures some Detroit bonds, derailed a previous attempt by the city to get out of the swaps contracts with UBS AG and Bank of America Corp.’s Merrill Lynch unit. A lawyer for the New York-based company told Bankruptcy Judge Steven Rhodes in Detroit yesterday that his client has reservations about the latest plan as well. Judge Rhodes in January rejected as too costly a proposal to pay the banks $165 million to end the swaps, which have cost taxpayers about $200 million since 2009. Under an agreement announced this month, the city would pay $85 million in installments to the banks, in exchange for their endorsement of Detroit’s plan to adjust $18 billion in debt.

Detroit said in a court filing yesterday that it had reached an agreement with Barclays PLC for a $120 million loan that would allow it to invest in services and speed its path out of bankruptcy, Reuters reported today. The deal comes after the judge overseeing Detroit's historic bankruptcy case rejected a $350 million loan that would have raised $230 million for the city to end interest rate swaps. Those swaps were used to hedge interest rate risk on some Detroit pension debt. The city said earlier this week that it had reached a new agreement with Merrill Lynch Capital Services and UBS AG to end the swaps for $85 million. Two prior proposed deals with bigger price tags were rejected by U.S. Bankruptcy Judge Steven Rhodes.

Bankruptcy Judge Steven Rhodes had harsh words yesterday for attorneys fighting for a lofty insurance policy to protect members of a retiree committee from legal backlash associated with Detroit’s chapter 9 case, the Detroit News reported today. The nine-member committee of retirees, appointed to represent former city workers in the bankruptcy case, want taxpayers to underwrite the $602,250 insurance policy, a “necessary” expense, of their unpaid service. But the city, which requested the committee be formed and is footing its attorney bills, opposes the request for the “errors and omissions” liability insurance that would come out of the financially insolvent city’s coffers. While sympathetic to concerns of committee members, Judge Rhodes was critical of the request, noting that the proposed funding pot could better be used to pay for police officers, EMS workers or firefighters in the “service delivery insolvent” city. The amount, he added, appears to be “grossly disproportionate” to what would actually be needed.

Detroit said yesterday that it reached an agreement with two investment banks to end costly interest rate swaps, a move that could give Detroit access to revenue from casino taxes and give it leverage in efforts to win court approval for the city's plan to restructure its debt, Reuters reported yesterday. The deal to terminate the swaps, which were used to hedge interest rate risk on some Detroit pension debt, would cost the bankrupt city just $85 million. That is a steep drop from two previous deals that carried price tags of $165 million and around $230 million, respectively, and were rejected by Bankruptcy Judge Steven Rhodes as being too expensive for the bankrupt city.

Detroit faces a long legal fight over its valuable art collection and other key matters in its historic bankruptcy case, a bond insurer argued on Friday, that make it imperative to push back the start of a trial on the city's debt adjustment plan, Reuters reported on Saturday. Syncora Guarantee Inc. in a court filing warned that lawsuits will be filed over the Detroit Institute of Arts' collection, which the city is not selling at this point to help pay its $18 billion in debt. Syncora, which guaranteed payments on some of Detroit's bonds, and other creditors have pushed for the sale of art works to raise more cash for the city to spread among its thousands of creditors, who face steep losses in the largest municipal bankruptcy in U.S. history.

The $7.6 billion Hardest Hit Fund of the Troubled Asset Relief Program (TARP) was intended to help troubled property owners avoid foreclosure and keep their homes, Bloomberg News reported today. As foreclosures fall in most parts of the country, the fund is using the unspent $3.2 billion to remedy the crisis of abandoned homes. Detroit, which filed the biggest U.S. municipal bankruptcy last year, is getting about $52 million from the Hardest Hit Fund. The city plans to use money for demolition of houses in stronger markets where the land could be redeveloped, according to the Detroit Land Bank Authority, a government group that acquires, manages and disposes of tax-foreclosed and vacant properties. Newly elected Detroit Mayor Mike Duggan has centralized the city’s efforts to tear down buildings and fight blight with a new Department of Neighborhoods, a plan that he outlined in a Feb. 26 state of the city speech.

In order to shed much of its $18 billion debt, Detroit proposes giving unsecured bondholders, including holders of general-obligation debt, 20 cents on each dollar, according to a commentary in the latest edition of the Economist. Pensions will be cut, too. General pensioners will receive only 66 percent of their monthly pension (74 percent if they agree quickly). Pensioners in the police and fire departments have been offered 90 percent, but swift approval will net them 96 percent. The fact that some groups are doing far better than others sets the stage for some to approve the deal. In fact, if either class of pensioners rejects the deal, even a cramdown cannot force it through, according to the commentary. The restructuring plan rests on a bargain dreamed up by the state, foundations and the Detroit Institute of Arts (DIA). These groups will contribute $820m between them to the pension fund, but on the understanding that their cash is used to bolster the amount that pensioners, rather than other creditors, receive. At the same time the DIA would become an independent non-profit, a move intended to protect the art collection, much of which is now owned by the city. Bondholders are not impressed with this idea, either.

Nearly two months into his tenure as Detroit mayor, Mike Duggan outlined a plan for adding jobs and removing abandoned buildings in the bankrupt city during his first state of the city address yesterday, Reuters reported today. Duggan, seeking to find an agenda of his own while operating in the shadow of Emergency Manager Kevyn Orr, is doing what he can with the bankrupt city's limited resources to make headway on some of its most visible problems: decreasing urban blight and creating safe neighborhoods. The new mayor traced the city's problems to jobs, outlining plans to attract and grow more businesses and get people to work through an improved and expanded bus service or by making car ownership less expensive through city-sponsored auto insurance.

Bankruptcy Judge Steven Rhodes yesterday refused to delay the process of approving Detroit’s debt-cutting plan, arguing that the city would run out of cash if it takes too long, the Detroit News reported today. “The problem with delay is the city will not have any more money to pay you if this is put off two or four or six months,” Judge Rhodes told attorney Carole Neville, who represents Detroit retirees. Following a 40-minute hearing, Rhodes filed a written order keeping Detroit’s bankruptcy case on track for a June 16 trial. During the trial, Detroit must prove it can accomplish a plan to shed debt and end the biggest municipal bankruptcy case in U.S. history. Retirees and other creditors had asked the judge to slow approval of the debt-cutting plan to give them more time to file objections. Judge Rhodes gave them until April 1.

Fitch Ratings said yesterday that Detroit's plan to deal with its $18 billion of debt and emerge from municipal bankruptcy would set a troubling precedent for the U.S. municipal bond market, Reuters reported yesterday. Under the plan Detroit filed in U.S. bankruptcy court on Friday, owners of certain general obligation (GO) bonds would take an 80 percent haircut on their investments. The city's two pension funds, meanwhile, would see higher recovery rates, aided by pledges worth about $830 million from philanthropic foundations, the Detroit Institute of Art and Michigan Governor Rick Snyder, who still must win legislative approval for the state's $350 million share. The rating agency took particular issue with the treatment of voter-approved unlimited tax GO bonds as unsecured. Insurance companies that guaranteed debt service payments on those bonds have sued the city over this treatment.