CHICAGO — Detroit will have to reveal the fees it would pay to Barclays for a $350 million debtor-in-possession loan, the federal judge overseeing the city's bankruptcy case ruled Thursday.
The decision is a blow to the city and to the bank as they try to close one of the few DIP loans by a municipality in Chapter 9.
The ruling is part of a larger battle over Detroit's effort to win the court's approval to close the DIP loan.
The loan would give Barclays a super-priority lien and a pledge of the city's income and casino taxes. Several bond insurers and other creditors are fighting the deal.
The creditors also challenged Detroit's request to keep secret the fee it will pay to Barclays for the loan, and Judge Steven Rhodes heard testimony and arguments on the issue Thursday morning.
In rejecting the city's request, Rhodes said the fact that Barclays wants to keep the fees secret is "really quite irrelevant."
He ruled that the fees are subject to the Freedom of Information Act and therefore cannot be kept confidential.
During the hearing, James Saakvitne, managing director at Barclays, was questioned by Detroit and creditor attorneys.
The judge interrupted the questioning when Saakvitne said it was "very important" to Barclays to help the city.
"Hold on," said Rhodes. "What's very important to you is to make money."
"Yes," Saakvitne responded.
"So much for being willing to help the city, huh?" said Rhodes.
Savkvitne also said Barclays might not have agreed to the loan if it knew the fees had to be disclosed.
The problem, Detroit and Barclays argued in court filings, is that the bank plans to re-sell the loan to investors, and it borrowing costs could rise if investors knew what Barclays was paid.
"It is of the utmost importance to Barclays that the details of the fee structure set forth in the fee letter be confidential so that competitors may not use the information contained therein to gain a strategic advantage in the marketplace," the city argued in a court filing.
