Skip to content
Subscriber Only

Detroit Swap Banks Go First as Bankruptcy Looms: Muni Credit

Wall Street firms that sold interest-rate swaps to Detroit as part of $1.4 billion of pension-bond issues stand to get paid before investors and the retirees the borrowings were supposed to help.

In 2009, the companies -- UBS AG and SBS Financial Products Co. -- could have forced the city to pay a fee to end the agreements, which were designed to cut the cost of the debt. Instead, the firms struck a deal giving them a claim on Detroit’s gambling-tax revenue, guaranteeing they’ll get paid $50 million a year.