Aug. 15 (Bloomberg) -- Detroit plans to sell about $975 million in bonds for retirement costs and some creditor settlements as part of its bankruptcy restructuring plan awaiting approval by a federal judge.
The Detroit City Council approved four issues yesterday, including $632 million of tax-limited general obligations that would pay 4 percent interest for the first 20 years and 6 percent for another 10 years, according to city documents.
Detroit, the former capital of the U.S. auto industry, filed a record $18 billion municipal bankruptcy last year after decades of population decline. Michigan’s largest city has been negotiating with many of its biggest creditors, including unions, pension plans and some bondholders.
The $632 million in bonds would finance $450 million for retiree health care through a voluntary employee beneficiary association, agreed to by retirees. Another $34 million would pay claims by the city’s Downtown Development Authority.
A sale of $288 million of unlimited-tax general obligation bonds would finance settlements with the city’s unlimited-tax debtholders who agreed to receive 74 cents on the dollar. Those bonds would be issued by the Michigan Finance Authority and backed by state aid to the city.
A $55 million issue would finance a settlement with holders of limited-tax debt, who would receive 34 percent of their claims.
The council also approved refinancing for $5.5 billion of the city’s water and sewer debt. The water system, which serves about 40 percent of the state’s population, has issued a tender offer to buy back a portion of the bonds in hopes of reducing costs and raising money for improvements.
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