Detroit's reorganization plan received judicial approval Friday, paving the way for the nation's 18th-largest city to emerge from bankruptcy.
Judge Steven W. Rhodes of the United States Bankruptcy Court for the Eastern District of Michigan said Detroit can proceed to unload $7 billion in debt. The plan also frees up about $1.7 billion for health and safety services and to upgrade a creaking city computer system over the next 10 years.
Retired city workers took a 4.5 percent haircut to their pensions while bond holders that include Syncora Holdings Ltd. (OTC: SYCRF) and privately held Financial Guaranty Insurance Co. can expect getting a reported $0.13 to the dollar on their holdings.
Detroit filed for Chapter 9 bankruptcy in July 2013 with about $18.5 billion in debt. It is the largest municipal bankruptcy in U.S. history.
The plan envisions slashing about $1.6 billion from unfunded pension costs, 54 percent from $3.13 billion and saves the Detroit Institute of Arts, whose collection was recently valued $867 million.
Approval of the plan may enable the city to exit bankruptcy within weeks. After just 16 months, Detroit's bankruptcy case has moved forward faster than expected.
Vallejo, California required three years to emerge from bankruptcy while Stockton, California, required more than two years.
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