Detroit Sues to Cancel Some Costly Contracts

[unhappycamper]

http://dealbook.nytimes.com/2014/01/31/detroit-sues-to-cancel-some-costly-contracts/?hp

Detroit Sues to Cancel Some Costly Contracts
By MARY WILLIAMS WALSH

Detroit filed suit on Friday to invalidate some complex transactions it used to finance its pensions, contending they were illegal from the very beginning.

In a complaint filed in United States bankruptcy court, the city argues that deals with special entities set up in 2005 and 2006, which raised $1.4 billion, were aimed only at circumventing a ceiling on the amount of debt it could take on. It is seeking a ruling that it has no obligation to make payments on the so-called certificates of participation issued to raise the money.

In a stunning turnaround, Detroit is also seeking to cancel some costly long-term contracts that were part of the deal, leaving two large banks, Bank of America and UBS, empty-handed just weeks after offering to pay them $165 million to get out of them. If a judge agrees, Detroit could be freed from having to honor the contracts, known as interest-rate swaps, which require it to pay tens of millions of dollars a year to the two banks.

Detroit’s lawsuit came two weeks after its bankruptcy judge, Steven Rhodes, rejected the $165 million proposal as “too much money” and sent the city back to negotiate less costly terms. He also suggested that the city could bring suit contesting the legality of the transactions.

[Squinch]

1. AND they're trying to protect the pensions! The world has turned upside down!

[Demeter]

2. It's a well-deserved slapdown of the Snyder Gang

and 50% of a pension won't keep anyone alive.

The banksters were asking for it, and I hope they get it in full. That is: NOTHING!

[Squinch]

3. I do too. And I so feel for those people who worked all their lives.

[WhiteTara]

4. and the art!