March 14 (Reuters) - Detroit announced on Wednesday that it will redeem a chunk of debt it issued in 2014 as part of the city’s exit that year from its historic bankruptcy.
The city said it sent out a 30-day redemption notice and placed $52.3 million to pay off principal and $2.1 million to cover accrued interest into an escrow account in order to retire remaining financial recovery series 2014C bonds. The bonds will be redeemed effective April 13.
The city issued $88.43 million of unrated, taxable bonds in December 2014 along with nearly $1.2 billion of other debt to fund settlements with bond insurers, interest-rate swap providers, city pension funds, as well as to raise money for capital projects.
The debt issuance was part of Detroit’s federal court-approved plan to exit what was then the biggest U.S. municipal bankruptcy, which allowed the city to shed about $7 billion of its $18 billion of debt and obligations.
With $120 billion in combined bond and pension debt, Puerto Rico’s bankruptcy filing last year topped Detroit’s.
The 2014C bonds, which carry serial maturities from 2015 through 2027 and a 5 percent coupon, had been subject to a prior mandatory redemption totaling $15 million in January.
The retirement of the remaining bonds will result in an interest savings of $11.7 million, according to John Hill, the city’s chief financial officer.
The Detroit City Council last month approved a plan to tap up to $55 million in surplus cash to repurchase bonds.
Michigan’s biggest city is eying the end to state supervision of its finances this spring after its latest audit showed it completed a third-straight fiscal year with a balanced budget. One element of the city’s bankruptcy exit plan was the creation of an oversight board.
Reporting By Karen Pierog in Chicago Editing by Suzannah Gonzales