As far as bankruptcy proceedings go, there was a shocking twist in the City of Detroit Bankruptcy today. Judge Rhodes, who oversees the case, denied a Petition to approve a settlement with two banks that funded a disastrous loan to the city. The City and the banks had agreed to pay $165 Million to settle debts owed to Bank of America and UBS for a swaps deal under former mayor Kwame Kilpatrick. The deal was originally intended to shore up the two pension funds maintained by the City of Detroit. The issue that is before the Bankruptcy Court now is whether the deal, which pledged casino money, may have been illegal. If the deal itself is illegal then Bank of America and UBS would be treated as unsecured creditors (like a credit card, personal loan or any loan that does not pledge collateral). The Judge today seemed to be leaning towards a finding that the original swaps deal was illegal and therefore, Bank of America and UBS should be treated as unsecured creditors. His ruling seems to be intended to put the brakes on the Citys rush to resolve the issues regarding the swaps and force the two banks to take even less than the 43 cents on the dollar they had agreed to. One wonders why its the Judge that is looking out for the City of Detroits bottom line and not the City or its attorneys. You can read the article here: freep/article/20140116/NEWS01/301160104/detroit-bankruptcy-swaps-ruling
Posted on: Thu, 16 Jan 2014 20:59:16 +0000
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