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Barclays Capital has agreed to provide $275 million to finance Detroit’s operations as it comes out of bankruptcy, according to documents filed in bankruptcy court.

The agreement calls for the Michigan Finance Authority to issue financial recovery bonds in that amount and for Barclays to buy them at an underwriter’s discount that adds up to about $1.4 million. As the sole underwriter, Barclays will then have 150 days to resell the bonds in a syndication and public offering.

Part of the proceeds will be used to retire a $120 million loan, also from Barclays, that Detroit used to pay for its operations while in Chapter 9 bankruptcy. In addition, the city will use about $100 million of the proceeds to pay its obligations to two classes of bankruptcy creditors. The remaining amount is to be invested in public improvements intended to help reverse Detroit’s long decline.

Because Detroit is still in bankruptcy and seeking to impair its debts, it has agreed to take steps to protect the investors who will buy the recovery bonds. People who work in Detroit pay an income tax, and the city is pledging that tax revenue to make good on the bonds, according to a term sheet filed in the bankruptcy court. To make sure city officials cannot spend the income-tax revenue first, the money will be sent to an indenture trustee, Comerica Bank, which will put it in a special account covered by a first priority statutory lien. While in this account, the money can be used only for the benefit of the bondholders. The only portion of Detroit’s income-tax revenue that will escape this treatment is the part already dedicated to hiring and retaining city police officers.

Comerica will hold the tax revenue until there is enough to make coming bond payments, according to the term sheet. After that, the city will be able to transfer remaining revenue to accounts under its own control.

Detroit has also agreed to keep its income-tax rates high enough to keep at least two times the maximum annual cost of servicing the debt in the Comerica account. The term sheet says it “shall increase income-tax rates in accordance with applicable law to the extent necessary” to make this happen.

The city received 10 responses to its request for proposals for the exit financing, which its emergency manager, Kevyn Orr, said showed “the city’s viability as an attractive investment.”

The city is scheduled to defend its bankruptcy exit plan before Judge Steven Rhodes next week. The plan must be confirmed by the court before Detroit can emerge from bankruptcy and the exit-financing plan can be put in effect.