DETROIT, March 4 (UPI) -- Detroit has reached a deal with two banks that could go a long way to resolving the bankrupt city's financial problems, court documents show.
The agreement with UBS AG and Bank of America's Merrill Lynch Capital Services, which must get the OK of U.S. Bankruptcy Judge Steven Rhodes, could save taxpayers $201 million and put pressure on other creditors to accept cuts totaling $9 billion, the Detroit News reported Tuesday.
Under the deal worked out with the city, the two banks would get $85 million, or about 30 cents on the dollar, the newspaper said, noting city Emergency Manager Kevyn Orr had proposed paying them about 75 cents on the dollar when he took the city into bankruptcy last July.
"I think there's one thing we can say with certainty is there's no guarantee Judge Rhodes will do anything," said Michael Sweet, a San Francisco bankruptcy attorney following Detroit's situation. "Judge Rhodes is going to scrutinize any deal people put in front him."
The banks have agreed to vote in favor of Orr's proposed debt-cutting plan of adjustment and "if necessary, a cramdown plan of adjustment over the objection of a dissenting class or classes" of creditors, the News said.
"We appreciate the banks' willingness to work with us to reach a solution that we think balances our goal to provide realistic recoveries to creditors while freeing up critical funds that we can invest to improve the quality of life in Detroit," Orr said Monday in a statement.
Last month, Rhodes rejected a $165 million settlement reached with the banks in late December.