Barclays PLC has agreed to raise up to $275 million to fund Detroit's exit from municipal bankruptcy, the city announced on Thursday.
The financing will involve financial recovery bonds issued through the Michigan Finance Authority then purchased by Barclays at a price equal to par, according to deal's term sheet. Barclays will be the exclusive underwriter and syndication agent for the so-called exit facility.
Proceeds from the issue, which will include up to $200 million of tax-exempt debt, will be used to retire a $120 million loan, as well as to fund post-bankruptcy improvements and pay for certain creditor claims, the city said in a statement.
"We are very pleased to have secured this exit facility and are encouraged by the reception we received from the broader financial community," Detroit Emergency Manager Kevyn Orr said in the statement. "We look forward to deploying these funds in our ongoing effort to make Detroit a viable and strong American city once again."
The announcement came as U.S. Bankruptcy Court Judge Steven Rhodes will start on Tuesday a key hearing to determine if the city's plan to adjust $18 billion of debt is feasible and fair.
Detroit filed the biggest-ever municipal bankruptcy in July 2013. (Reporting By Karen Pierog; Editing by Diane Craft, Bernard Orr)