CHICAGO -- Ahead of a hearing on April 2, Detroit Friday released details of its proposed $120 million loan from Barclays.
U.S. Bankruptcy Judge Steven Rhodes on March 25 ordered the city to disclose the details after several creditors, including Syncora Guarantee Inc., challenged the deal, in part because of insufficient information.
In its response, the city claimed that all relevant financial information was included in its original filing but that it would attach the actual term sheets and other documents for clarity's sake.
Challengers argue the loan is materially different from one that Rhodes conditionally approved in January. In its response, Detroit calls that a "faulty premise" that would require "yet another round of expensive discovery, more delay and additional days of contested evidentiary hearings."
The major difference between current proposed debtor-in-possession loan and the city's original proposed $350 million loan, besides the smaller size, is the new collateral backing it.
The city is now pledging its income tax revenue instead of its gambling taxes after Rhodes warned in January that the city needed to be careful about using the casino revenue as collateral.
The interest rate remains the same: the city will pay an interest rate based on the London Interbank Offered Rate plus 3.5%, with 3% market flex built in.
Barclays plans to resell the debt after the deal closes. The debt matures either when a debt plan of adjustment is approved by the court or 2.5 years after the closing.
Also like the original deal, the new loan features a lengthy list of default triggers.
Unlike the previous deal, the city has agreed to reimburse Barclays for all legal fees and expenses if the loan is not closed by April 15.
The city's filing also provided a detailed list of the use of the proceeds as ordered by Rhodes.
Detroit plans to spend $36.2 million on the police department; another $36 million on blight removal; $28 million on the fire department; $25 million to upgrade finance department information technology and hire staff; and other various service upgrades.