Orr. (Max Ortiz / Detroit News)
Detroit — Emergency Manager Kevyn Orr is being deposed Tuesday over a deal the city struck last week with two banks to terminate a troubled pension debt.
The deposition involving the Christmas Eve agreement between the city, Bank of America and UBS AG comes in advance of a Friday hearing in U.S. Bankruptcy Court. Judge Steven Rhodes must approve the deal by Jan. 31.
Orr’s spokesman Bill Nowling confirmed Orr was participating in the closed-door questioning being conducted by individuals who do not support the agreement. Lawyers for the city’s pension funds have said the deal is not reasonable and gives the banks a windfall at the expense of the city. Other groups, including New York-based bond insurer Syncora Guarantee, which stands to lose millions in the deal, have also objected.
The deal requires the city to pay the banks $165 million to terminate the pension debt. The move would give the city unrestricted access to $180 million in annual casino cash, which Orr has said is Detroit’s most stable revenue source.
Detroit renegotiated the terms of the agreement after Rhodes questioned whether an earlier $230 million settlement was fair to other creditors, including pensioners, who could be facing cuts. The banks agreed to take $65 million less after two days of mediation.
Orr has said Detroit will save $128 million by terminating the debt deal reached during ex-Mayor Kwame Kilpatrick’s tenure. Instead of borrowing $350 million from London-based Barclays, the city will borrow $285 million.
Orr has said Detroit will pay $165 million to the banks and spend $120 million on basic city services, including blight removal, updating city information technology and other “quality of life” improvements.
On Monday, Chief Detroit U.S. Bankruptcy Judge Gerald Rosen and Oregon U.S. Bankruptcy Judge Elizabeth Perris — the judicial mediators who helped broker the deal — recommended the bankruptcy court approve the new deal, saying it’s a “significant step” in resolving Detroit’s restructuring.
Rhodes ordered the negotiation sessions earlier this month after expressing concern about Detroit’s plan to pay the two banks banks up to $230 million to end an interest rate swap arrangement.