(Bloomberg) -- Detroit agreed to pay $77.6 million to UBS and Bank of America’s Merrill Lynch unit to end interest-rate swaps that have cost taxpayers more than $200 million since 2009, according to a court filing in the city’s bankruptcy.
The settlement, which is a 70% reduction in the amount the city was liable for under the 2009 agreement, will release Detroit from claims by the banks and provide “greater certainty with respect to the city’s cash flows and liquidity,” Detroit’s attorneys said in a filing yesterday seeking approval for the accord from U.S. Bankruptcy Judge Steven Rhodes. The payments will be made over time, rather than in a lump sum, the lawyers said.
“The settlement also contains an agreement by the swap counterparties to vote their impaired claims in favor of a plan of adjustment,” the city said in the filing.
Rhodes in January rejected as too costly a proposal by the city to pay $165 million. Under the 2009 swaps agreement, the banks have the right to seek control of Detroit’s casino taxes, which the city pledged as collateral.
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