- Posted August 30, 2013
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Bankruptcy judge says Detroit casino revenue protected
DETROIT (AP) -- Casino tax revenue can't be withheld from Detroit while the city is seeking Chapter 9 bankruptcy, a federal judge ruled Wednesday.
New York-based bond debt insurer Syncora Guarantee had been trying to keep up to $15 million of tax revenue each month in a bank-held trust. The money is part of an interest-rate swap deal on pension bond debt.
"The court concludes the casino revenues are protected by the automatic stay," U.S. Bankruptcy Judge Steven Rhodes said Wednesday, alluding to the bankruptcy petition, which halts lawsuits and other attempts to collect money from Detroit.
In 2009, Detroit pledged money from casino revenue taxes as collateral to avoid defaulting on past pension debt payments. The swaps allowed Detroit to get fixed interest rates on pension bonds and are with UBS and Bank of America.
State-appointed emergency manager Kevyn Orr is trying to get out of the interest rate swaps deal as the city tries to cut $18 billion or more in total debt.
He wants the bankruptcy court to approve a settlement in which Detroit would pay UBS and Bank of America as little as 75 cents on the dollar on $340 million in debt, according to The Detroit News and Detroit Free Press. That would allow the city to receive more casino tax revenue held in the trust.
Syncora, which insures the swaps, has said it could lose money if the deal between Orr and UBS and Bank of America is approved.
Orr filed suit last month to stop Syncora from keeping the monthly casino revenue from the city.
A Wayne County judge granted Detroit's request last month for a temporary restraining order that stopped Syncora.
Rhodes also ruled that Syncora can't object to the city's proposal involving UBS and Bank of America.
Orr was hired by the state in March to fix Detroit's finances -- it has a budget deficit of more than $300 million. Detroit became the largest U.S. city to seek bankruptcy protection on July 18.
Published: Fri, Aug 30, 2013
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