Detroit could face $400 million penalty in takeover scenario

Reuters News
Posted: Dec 02, 2011 4:48 PM

(Reuters) - Detroit could face a penalty of $400 million if the city's finances are taken over by the state of Michigan, according to sources.

The Detroit penalty would be triggered by termination of existing swap agreements with banks, said analysts at credit ratings agencies Moody's and Standard & Poor's.

The penalty could be as high as $400 million, according to a source familiar with the deals. Previous agreements were renegotiated after a termination in 2009 and could be renegotiated again.

(Reporting By Karen Pierog)