Detroit Reaches Water, Sewer Deal

Following months of contention, bankrupt Detroit finally reached a deal to shore up its water and sewer finances, potentially saving the city money and funding improvements to its water system. 

"Detroit’s bankruptcy judge approved a [deal] for the city’s water and sewer system to buy back bonds and refinance them at lower interest rates, a move that could save the department $241 million over 27 years" partially through lower interest rates, the Detroit Free Press reported. 

Detroit sold $1.8 billion in bonds as part of the deal. "Proceeds from the bonds, sold through the Michigan Finance Authority, will be used to buy back existing debt and make improvements to the water-and-sewer system, which also serves surrounding communities. The system is currently operated as a city department," the Wall Street Journal reported. 

Kevyn Orr, Detroit's emergency manager, issued strong support for the deal. 

"This is a good deal for the city for several reasons," he said, per Reuters. "It provides money to the city that can reduce the debt. It will also provide a settlement with the bondholders."

Federal mediators negotiated the deal. Under the agreement, "the city asked bondholders to turn in bonds early. Though the offer was made to all holders of $5.2 billion in Detroit Water and Sewerage Department bonds, the target was a smaller subset of bonds," the report said. 

There appears to be a healthy demand for the bonds. "Detroit's sale of nearly $1.8 billion of water and sewer bonds attracted about $7.6 billion in orders and will save the bankrupt city nearly $250 million," Reuters reported in a separate article. 

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