CHICAGO — Michigan Gov. Rick Snyder has signed legislation designed to ease Detroit's first post-bankruptcy appearance in the debt market.
Snyder signed Senate Bill 160 into law Wednesday, giving bondholders a statutory lien and intercept on Detroit's income tax.
The measure was created to support $275 million of income-tax backed bonds that the city privately placed with Barclays in December as it exited Chapter 9. The Barclays agreement calls for the city to roll the debt into long-term bonds within 150 days of the placement, which will mark Detroit's first post-bankruptcy public financing.
Snyder called the bill a "technical fix" in a statement. Supporters say the measure will save the city between $20 million and $30 million in interest costs over the life of the bonds.
"We need to ensure Detroit's debt is repaid under the terms of the bankruptcy to allow the city to continue its recovery," Snyder said in a statement. "The savings from lower interest costs will allow Detroit to reinvest in critical areas like public safety and municipal services."
The sale date is not yet certain.
The Barclays agreement requires the city to seek at least two credit ratings, and officials hope that the new statutory lien and intercept feature will win investment-grade ratings for the debt. Currently all of the city's debt is junk rated.
Fiscal analysts reviewing the bill said the lien and intercept could save the city between $2 million and $3 million a year on debt service.
The $275 million of bonds, which currently feature eight- and 10-year maturities, are the city's only debt backed by an income tax pledge.
The Republican-led House passed SB 160 by a vote of 107 to 3 on April 15. The Senate approved the measure in March.