By Matthew Dolan
DETROIT--The city of Detroit will be able to borrow $120 million
to combat crime and blight after a federal judge approved the
municipality's first fundraising since filing for bankruptcy
protection.
U.S. Bankruptcy Judge Steven Rhodes said Wednesday that he
approved the city's borrowing from Barclays Capital, a subsidiary
of Barclays PLC, to buy new police and firefighting vehicles, among
other purchases, because of the urgent need to improve city
services.
Detroit "is not providing the basic services to meet the basic
needs of its citizens," the judge said.
Last July, Detroit became the largest city in the country to
seek Chapter 9 bankruptcy protection, with the aim of restructuring
more than $18 billion in long-term obligations.
The city is backing up the borrowing through income-tax revenue
and the future sale of assets. Creditors had questioned the need
for a new loan in a city where risky borrowing was seen as a
driving force behind the bankruptcy.
Earlier this week, the city filed a revised debt-cutting plan
with the federal court that includes a deal with two banks to shave
its debt to $85 million from about $288 million owed. But no other
creditors have forged similar deals, and some creditors, including
bond insurers, plan to fight the proposed deal with the two banks,
UBS AG and Bank of America Corp., at a court hearing in Detroit on
Thursday.
During Wednesday's hearing, Judge Rhodes also questioned a city
attorney about the effect of the city's proposed debt-cutting plan
on individual pension holders.
According to city officials, if current and retired police and
firefighters vote to approve the new plan filed earlier this week,
they would see a 6% reduction in their pension benefits and the
elimination of cost-of-living adjustments. If they voted against
the plan, the reduction would increase to 14%. Other employees and
retirees would also see greater cuts under the revised plan.
Bill Nowling, a spokesman for Detroit Emergency Manager Kevyn
Orr, said Wednesday that the plan includes more than $800 million
in funding promised by foundations and the state to help the city
pay its pension obligations.
But delivery of that money requires that a majority of holders
with each of the city's pension systems must vote in favor of the
plan, according to Mr. Nowling.
The city in court documents said it would spend part of the new
money to hire more public-safety personnel, buy them equipment,
build facilities and upgrade their fleets.
Part of the $120 million, city officials said, would also be
used to tear down some of the estimated 80,000 vacant and
dilapidated buildings across the city.
Write to Matthew Dolan at matthew.dolan@wsj.com
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