Feb. 21 (Bloomberg) — Detroit filed a proposal to reduce its $18 billion debt load and exit court supervision, starting what may be the most contentious phase of the biggest-ever U.S. municipal bankruptcy as general-obligation bondholders face a recovery of 20 percent.
The city's debt-adjustment plan was filed today in U.S. Bankruptcy Court in Detroit. In addition to proposed cuts to the bonds, the city would also pay retired police and firefighters 90 percent of their pensions, while general public employees would get two-thirds of theirs.
City unions have challenged Detroit's right to use bankruptcy to cut pensions, while investors and insurers have sought to reserve tax revenue to back general-obligation bonds. The city has also been trying to cancel interest-rate swaps that cost taxpayers $4 million a month.
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