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Detroit deal with insurers could set stage for more compromises


Detroit deal with insurers could set stage for more compromises

By Lisa Lambert WASHINGTON (Reuters) - Detroit on Wednesday struck a deal with a core group of creditors that dramatically cuts the losses they would suffer in the city's landmark bankruptcy case, a breakthrough that could pave the way for settlements with other holdout creditors. Additionally, Detroit might no longer try to classify nearly $400 million of voter-approved general obligation bonds as unsecured, a threat that had been a chilling prospect for municipal bond investors who have long viewed so-called GO debt as that market's safest investments. Their final status is still under discussion, but the settlement assures they will receive a superior payout than other unsecured creditors. Terms of the settlement, announced by U.S. Bankruptcy Court mediators in a case brought by the bonds' insurers, mean that bondholders will receive $287.5 million of $388 million they are owed from a dedicated stream of tax revenue backing the debt, known as unlimited tax general obligation bonds.


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