The federal judge overseeing Detroit’s bankruptcy has approved a controversial $120 million loan with Barclays, clearing the way for the City to move forward with its first borrowing since it filed for bankruptcy last July. The city says the loan will provide cash necessary for everything from new police and fire vehicles to blight elimination.

U.S. Bankruptcy Judge Steven Rhodes signed off on the so-called quality-of-life loan during a Wednesday hearing. On Thursday, he was expected to consider the City’s $85 million settlement with its interest-rate swap counterparties UBS AG and Merrill Lynch Capital Services Inc. Both items are considered key hurdles for the city as it moves through the largest municipal bankruptcy in U.S. history.

Creditors objecting to the loan questioned whether the City was getting the best deal and argued that the terms were different enough to require a new hearing. In approving the loan, Judge Rhodes said Detroit had demonstrated the need for the money.

On Monday, the City filed a revised bankruptcy plan that would impose 85 percent haircuts on general obligation bondholders. The revisions featured lower recovery rates and bondholders and most pensioners than the original plan.

Vincent J. Marriott III, a Ballard Spahr attorney who represents a group of European banks that hold some of Detroit’s pension certificates, told Judge Rhodes the new plan is worse than the original one. “The city has been trying to beat creditors into submission,” he said.

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