The Detroit City Council has rejected a $350 million loan deal secured by Emergency Manager Kevyn Orr.
Orr announced the deal with the British financial giant Barclays earlier this month.
The plan was to use most of the money—about $230 million—to pay off two banks who profited from a bad interest rate swaps deal Detroit made on some pension debt years ago.
Orr wants to strike a deal to pay those banks something like 75 cents on the dollar. That’s a controversial plan because he’s proposed much steeper cuts for other Detroit creditors, including retirees and some bondholders.
Citing concerns about that and some of the loans’ terms, the City Council unanimously rejected the proposal.
The vote itself doesn’t mean much, because the Council’s powers are limited under the state’s emergency manager law. A state emergency loan board will make the final call.
But some Council members say they hope the vote sends a message to bankruptcy court Judge Steven Rhodes—who will have to approve the deal, as well as the larger settlement with the banks.