CHICAGO — The banks that hold $1.4 billion of Detroit's pension certificates have appealed the bankruptcy court's recent approval of a settlement with the interest-rate swap counterparties that hedge the certificates.
Dexia Credit Local, Erste Europaische Pfandfrief- und Kommunalkreditbank Aktiengesellschaft, FMS Wertmanagement, Hypothekenbank Frankfurt AG, and Hypothekenbank Frankfurt International SA appealed Bankruptcy Judge Steven Rhodes' swaps ruling to the U.S. District Court for the Eastern District of Michigan, Southern Division.
Syncora Guarantee Inc., the bond insurer that insures the swaps and some of the pension certificates, appealed Rhodes' ruling on April 21 to the same court.
Rhodes made his ruling on April 11. The deal calls for Detroit to pay UBS AG and Merrill Lynch Capital Services Inc. $85 million to avoid termination of the swaps, estimated at roughly $288 million.
Rhodes had rejected two previous deals the city made with the counterparties.
Syncora and the banks are fighting Detroit's related lawsuit that seeks to invalidate the pension certificates, arguing that they were illegally issued in the first place.
