DETROIT (AP) — The city of Detroit reached a deal in bankruptcy over $388 million in bonds, mediators announced Wednesday, a significant agreement that could influence other creditors to try to get a settlement.
Detroit will pay 74 cents for each dollar. Roughly $50 million in tax revenue that won't be needed to pay the balance instead will go to a fund to help low-income retirees who are expected to see smaller checks when the bankruptcy case ends.
The deal still needs the blessing of Judge Steven Rhodes and is only a small part of the $18 billion case, the largest bankruptcy by a local government in U.S. history.
Detroit emergency manager Kevyn Orr, appointed by the state to run the city, said he hopes to announce more deals soon.
"It's important that people get on the bandwagon," Orr told The Associated Press, referring to other creditors, especially unions, who have been privately meeting with the city and mediators.
Earlier, on CNBC, Orr said he doesn't want to turn to a "cram-down," a bankruptcy term that gives a judge sweeping power to settle disputes.
The aid for low-income retirees was welcomed by a spokesman for the police and fire pension fund.
"However, whether the settlement as a whole is advantageous to the city and to the retirement systems — we just do not know," Bruce Babiarz said.
Detroit hopes to exit bankruptcy by October, but the city's plan first faces a series of court hearings in summer. The most divisive issue: cuts to pensions.
The city is proposing a 6 percent cut for retired police officers and firefighters, and a 26 percent cut for other retirees. The difference is tied to the health of the two pension funds.
Continue reading this story on the...