Detroit — The city secured up to $275 million in financing — money that will help bankroll Detroit’s restructuring and pay off debts if the city successfully emerges from bankruptcy court.

The deal, revealed in a bankruptcy court filing Thursday, is with Barclays Capital Inc., which will provide up to $275 million. The city originally sought up to $300 million.

The deal will let Detroit pay off a $120 million loan from Barclays that financed “quality of life” improvements to city services. It also will allow Detroit to pay $45 million toward a settlement of a troubled pension-related debt with two banks, and potentially $55 million toward limited-tax general obligation bondholders.

The deal dispels fears that Detroit — and other struggling municipalities nationwide — would fail to secure financing after filing bankruptcy and should leave the city with a cleaner balance sheet, Bloomfield Hills bankruptcy lawyer Douglas Bernstein said.

“The fear was nobody was going to do business with Detroit; they’ll be blackballed,” Bernstein said. “Ultimately, you could see a better city through the use of the funds.”

The financing deal involves the Michigan Finance Authority issuing bonds if Detroit successfully emerges from bankruptcy court. A trial over the city’s debt-cutting plan starts Tuesday in bankruptcy court.

Several firms expressed interest in lending money, Emergency Manager Kevyn Orr said.

“Detroit continues to make steady progress in returning to firm financial footing and becoming an attractive place to invest once again,” Orr said in a statement. “We look forward to deploying these funds in our ongoing effort to make Detroit a viable and strong American city once again.”

The tax-exempt bonds as part of the financing will pay an interest rate equal to a municipal swap index plus 4.25 percent, said Orr’s spokesman Bill Nowling. The taxable bonds will be based on the Libor benchmark rate plus 4.75 percent.

Two previous deals to borrow $350 million and then $285 million fell through after U.S. Bankruptcy Judge Steven Rhodes rejected the city’s plans to use a large portion of those loans to pay off a troubled pension-related debt.

When Detroit’s financial consultants were negotiating the original loan last fall, the city had to pay Barclays half of its $4.4 million loan processing fee up front.

Under the “quality of life” deal, Barclays agreed to cut that fee by $1 million.

That loan was backed by income tax revenue and up to $10 million in collateral from the sale or “monetization” of unnamed city assets. The loan agreement “expressly excludes” any city-owned art at the Detroit Institute of Arts.

The quality-of-life loan was intended to go toward upgrading city computer systems and buying new equipment for the police, fire and emergency medical services departments. Barclays is charging the city a base interest rate of 3.5 percent plus a market-based flexible rate that would cap total interest payments at 6.5 percent, Orr spokesman Bill Nowling said.

The term of the loan would end on the day Detroit exits bankruptcy, meaning the city would have to secure “bridge financing” to service the new debt or earmark certain revenues for repayment of the balance.

Staff writer Chad Livengood and wire reports contributed.

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