NOTICE OF PLAN CONFIRMATION, EFFECTIVE DATE, CASH DISTRIBUTION AND PARTIAL MANDATORY EXCHANGE on December 10, 2014

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1 CITY OF DETROIT FINANCE DEPARTMENT ADMINISTRATION COLEMAN A. YOUNG MUNICIPAL CENTER 2 WOODWARD AVENUE, SUITE 1200 DETROIT, MICHIGAN PHONE: FAX: NOTICE OF PLAN CONFIRMATION, EFFECTIVE DATE, CASH DISTRIBUTION AND PARTIAL MANDATORY EXCHANGE on December 10, 2014 RE: City of Detroit General Obligation Bonds (Limited Tax) CUSIP Prefix Series General Obligation Bonds Self-Insurance Bonds (Limited Tax), Series 2004 (Federally Taxable) General Obligation Refunding Bonds (Limited Tax), Series 2005-A(1) General Obligation Refunding Bonds (Limited Tax), Series A(2)(Federally Taxable) General Obligation Bonds (Limited Tax), Series 2005-B General Obligation Refunding Bonds (Limited Tax), Series 2008-A(1) General Obligation Bonds (Limited Tax), Series 2008-A(2 (Taxable)) CUSIPS A B B B B B C C C C C C C D D D D D E E E F F F F F Q Q Q45

2 The Bonds (the LTGO Bonds ) were issued by the City of Detroit (the City ). The holders and beneficial owners of the LTGO Bonds are referred to herein as the Bondholders. I. Background The City s bond authorizing resolutions provided for the LTGO Bonds to be repaid from the City s general fund and, subject to constitutional, statutory and charter tax rate limitations, from the proceeds of its operating taxes. The payments on the City s 2005 LTGO Bonds (the Insured LTGO Bonds ) are insured by Ambac Assurance Corporation ( Ambac ). The remainder of the LTGO Bonds is uninsured. Further detailed background and historical information is available on the Municipal Securities Rulemaking Board website at including (i) a disclosure memorandum, dated December 10, 2014, relating to City of Detroit, Michigan Financial Recovery Bonds, Series 2014B (Limited Tax) dated December 10, 2014 and (ii) the Confirmation Order (defined below). On July 18, 2013, the City filed its petition for bankruptcy protection as a debtor under Chapter 9 of Title 11 of the United States Code, 11 U.S.C. 101 et seq. (the Bankruptcy Code ) in the United States Bankruptcy Court for the Eastern District of Michigan (the Bankruptcy Court ). The bankruptcy has been pending as Case Number (the Bankruptcy Proceeding ) and was assigned to Judge Steven Rhodes. On November 7, 2014, Judge Rhodes confirmed the City s Eighth Amended Plan for the Adjustment of Debts of the City of Detroit (the Plan ), and on November 12, 2014, Judge Rhodes entered his Order confirming the Plan (the Confirmation Order ). The Plan becomes effective on December 10, 2014 (the Effective Date ). On October 1, 2013, the City defaulted on its obligation to make interest payments on the LTGO Bonds in the amount of $4,348,211 and Ambac paid claims in the amount of $2,266,586 on account of the Insured LTGO Bonds and was subrogated to the rights of the owners for such payments. On April 1, 2014, the City defaulted on its obligation to make interest payments in the amount of $4,348,211 and principal payments in the amount of $43,420,000 on the LTGO Bonds, and Ambac paid claims in the amount of $20,686,586 on account of the Insured LTGO Bonds and was subrogated to the rights of the owners for such payments. The Ambac insurance documents contemplated the assignment of the Insured LTGO Bonds to Ambac upon payment of a claim. On July 7, 2014, the Bankruptcy Court ruled that Ambac had the right to vote the claims of the holders of the Insured LTGO Bonds in the bankruptcy case. Ambac and BlackRock Financial Management, a beneficial owner of a portion of the 2008 LTGO Bonds, together representing more than two-thirds in amount of the LTGO Bonds, negotiated a consensual resolution of their disputes relating to the LTGO Bonds and the Class 7 Claims (the Settlement ). Pursuant to the Settlement, as modified by the subsequent settlement by the City of other claims, the City agreed to a total Allowed Claim (the LTGO Allowed Claim ) for the LTGO Bonds of $163,544,770. This sum represents the principal amount of the LTGO Bonds maturing on or after April 1, 2014, and interest payments which were due on the LTGO Bonds 2

3 on October 1, 2013 and April 1, Interest due on the LTGO Bonds on October 1, 2014 was not included in the LTGO Allowed Claim. Ambac has paid insurance claims to the beneficial owners of Insured LTGO Bonds with respect to interest due on October 1, 2013, principal and interest due on April 1, 2014, and interest due on October 1, 2014 on such Insured LTGO Bonds and in the Settlement has indicated its intention to continue to pay such claims with respect to principal and interest becoming due on Insured LTGO Bonds in the future. Pursuant to the Plan, on the Effective Date or as soon as practicable thereafter, the City will satisfy a portion of the LTGO Allowed Claim with a cash payment of $55,000,000 to be distributed as described below. In addition, on the Effective Date, the City issued its Financial Recovery Bonds, Series 2014B (the 2014 Bonds ) in the aggregate principal amount of $631,964,145, to satisfy a portion of the LTGO Allowed Claim and other claims allowed under the Plan. The 2014B Bonds have been issued as term bonds in two series. Both series mature on April 1, 2044, bear interest at the rate of 4% per annum to and including March 31, 2034 and at the rate of 6% per annum from April 1, 2034 until final maturity on April 1, 2044 or earlier redemption. Both series of 2014B Bonds become subject to mandatory redemption prior to maturity in equal annual principal installments beginning on April 1, The 2014 Bonds are payable from the same sources as the original LTGO Bonds. The 2014B Bonds are comprised of two series: The Series 2014B(1) Bonds will pay interest in arrears on April 1 and October 1 of each year beginning April 1, The Series 2014B(2) Bonds will also pay interest semiannually on the same dates, provided that the interest accruing from April 1, 2015 to and including September 30, 2015 will be prepaid to the beneficial owners on April 1, 2015 rather than on October 1, The 2014B Bonds are registered in the book-entry system maintained by and may be traded through The Depository Trust Company ( DTC ); provided, that the holders of the Series 2014B(2) Bonds may not trade or exchange those bonds until October 1, II. Effective Date; Implementation of the Plan The Bankruptcy Court has confirmed the Plan. The Effective Date of the Plan will occur on December 10, The payments and distributions described herein will be made to Bondholders on December 10, Holders of Allowed Claims for LTGO Bonds will be treated in the Plan as follows: (i) all uninsured LTGO Bondholders will receive a distribution of their Pro Rata share of $55,000,000 in cash, all uninsured LTGO Bonds will be cancelled and discharged, and will receive their Pro Rata share of $7,356,661 in principal amount of Financial Recovery Bonds, Series 2014B (the 2014B Bonds ), including $5,585,424 of Series 2014B(1) Bonds and $1,771,237 of Series 2014B(2) Bonds, as described below; and (ii) (a) all Insured LTGO Bondholders will receive a distribution of their Pro Rata share of $55,000,000 in cash, all Insured LTGO Bonds will be cancelled and discharged as to the City but will remain outstanding solely for recourse to Ambac, i.e., the City will have no liability relating to the LTGO Bonds, and any liability of the City in 3

4 respect of LTGO Bonds and Class 7 Claims in the Plan shall be cancelled and discharged; and (b) $9,945,200 in principal amount of 2014B Bonds, including $7,553,411 of Series 2014B(1) Bonds and $2,391,789 of Series 2014B(2) Bonds, attributable to the Insured LTGO Bonds will be delivered to U.S. Bank National Association, as Agent, pursuant to a Distribution Agent Agreement among the City, Ambac and U.S. Bank National Association as both paying agent for the LTGO Bonds ( LTGO Paying Agent ) and as escrow and distribution agent ( Agent ). The 2014B Bonds are being issued in authorized denominations of $1.00. Where a distribution of 2014B Bonds in exchange for your LTGO Bonds would have otherwise required an allocation of a 2014B Bond in a fractional amount less than $1.00, the allocation will be rounded down to the nearest $1.00 as provided in the Plan of Adjustment. Each holder of LTGO Bonds which are not insured by Ambac will receive a pro rata share of Series 2014B(1) Bonds and Series 2014B(2) Bonds in a mandatory exchange for that holder s remaining LTGO Bonds. Series 2014B(1) Bonds and Series 2014B(2) Bonds allocable to holders of Insured LTGO Bonds shall be delivered to U.S. Bank as Agent. The Agent shall be the escrow agent for the beneficial owners of the Pro Rata share of 2014B Bonds attributable to the Insured Prior LTGO Bonds pursuant to the Distribution Agent Agreement. The Insured LTGO Bonds have been cancelled and discharged as to the City, but shall remain on the books of the Depository Trust Company and the Paying Agent for the limited purpose of maintaining the recourse of the holders of Insured LTGO Bonds to the Ambac insurance policy. The City has no further liability relating to any of the LTGO Bonds. So long as Ambac continues to honor claims on the original payment dates for the payment of principal and interest on Insured LTGO Bonds, Ambac will receive all payments of principal and interest on the 2014B Bonds held by the Agent for its benefit. In the event Ambac fails to honor a claim to pay principal or interest on the Prior LTGO Bonds, the Agent will remit payments on the 2014B Bonds to the holders of the Insured LTGO Bonds which remain outstanding for purposes of payments of insurance claims by Ambac. Once Ambac has paid the Insured Prior LTGO Bonds in full, the Agent will transfer to Ambac its Pro Rata share of the 2014B Bonds. The City understands that for those LTGO Bonds insured by Ambac, holders will also receive, from a draw under the related Ambac insurance policy, accrued interest on the portion of the principal paid from the December 10 distribution for the period from October 1, 2014 to, but excluding, the Effective Date. Such interest amounts are set forth in the Exchange Table below. Attached as Schedule 1 is a table (the Exchange Table ) that provides information from which you can determine the amount of your cash distribution, and the principal amount of, special interest payment, and CUSIPs for, Series 2014B(1) Bonds and Series 2014B(2) Bonds that you or the Agent will receive. Payments and distributions of 2014B Bonds, in the case of the uninsured LTGO Bonds, will be made to Bondholders on December 10, 2014 through DTC. Except as described above, this exchange and payment represents the only distribution holders of uninsured LTGO Bonds will receive on the LTGO Bonds. Except for the distribution 4

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6 SCHEDULE 1 CASH DISTRIBUTION AND EXCHANGE TABLE 6

7 Schedule 1 Distribution of Cash and City of Detroit Financial Recovery Bonds Series 2014 B(1) and 2014 B(2) to Bondholders Series / CUSIP Insurer Maturity Interest Rate Principal Effective Date Cash Distribution Ending Factor 12/9/14 Record Date Special Interest Cash Distribution New B-(1) CUSIP New B-(1) Principal New B-(2) CUSIP New B-(2) Principal Outstanding and Matured Uninsured Bonds Series 2008-A(1) Q29 N/A 4/1/ % 21,090, ,197, S84 1,720, S92 544, Q37 N/A 4/1/ % 22,175, ,567, S84 1,809, S92 572, Subtotal $43,265, $14,765, $3,530, $1,116, Series 2008-A(2) (1) Q45 N/A 4/1/ % $25,000, $8,606, S84 $2,055, S92 $655, Total Uninsured Bonds $68,265, $23,372, $5,585, $1,771, Outstanding Insured Bonds - Distribution to Agent for Insured Bonds Series 2005-A(1) B33 Ambac 4/1/ % 3,950, ,346, , S84 321, S92 101, B41 Ambac 4/1/ % 4,130, ,407, , S84 336, S92 106, B58 Ambac 4/1/ % 18,565, ,335, , S84 1,511, S92 478, B66 Ambac 4/1/ % 29,480, ,065, , S84 2,405, S92 760, Subtotal $56,125, $19,154, $183, $4,574, $1,448, Series 2005-A(2) C40 Ambac 4/1/ % 745, , , S84 60, S92 19, C57 Ambac 4/1/ % 775, , , S84 62, S92 19, C65 Ambac 4/1/ % 805, , , S84 65, S92 20, C73 Ambac 4/1/ % 835, , , S84 67, S92 21, C81 Ambac 4/1/ % 870, , , S84 70, S92 22, C99 Ambac 4/1/ % 905, , , S84 73, S92 23, D23 Ambac 4/1/ % 1,000, , , S84 81, S92 25, D31 Ambac 4/1/ % 1,000, , , S84 81, S92 25, D49 Ambac 4/1/ % 1,040, , , S84 84, S92 26, D56 Ambac 4/1/ % 1,095, , , S84 89, S92 28, D64 Ambac 4/1/ % 1,150, , , S84 93, S92 29, Subtotal $10,220, $3,482, $30, $831, $263, Series 2005-B E89 Ambac 4/1/ % 1,000, , , S84 81, S92 25, E97 Ambac 4/1/ % 1,020, , , S84 83, S92 26, F21 Ambac 4/1/ % 1,075, , , S84 87, S92 27, F39 Ambac 4/1/ % 1,125, , , S84 91, S92 29, F47 Ambac 4/1/ % 1,180, , , S84 96, S92 30, F54 Ambac 4/1/ % 1,240, , , S84 101, S92 31, F62 Ambac 4/1/ % 1,300, , , S84 106, S92 33, Subtotal $7,940, $2,709, $25, $647, $204, Total Outstanding Insured Bonds $74,285, $25,346, $239, $6,054, $1,916, Series 2004 Matured Insured Bonds - Direct Payment from City to Ambac in Respect of Paid Claims A59 Ambac 4/1/ % $13,000, $4,434, S84 $1,058, S92 $335, Series 2005-A(1) B25 Ambac 4/1/ % $3,770, $1,284, S84 $306, S92 $97, Series 2005-A(2) C32 Ambac 4/1/ % $715, $243, S84 $58, S92 $18, Series 2005-B E71 Ambac 4/1/ % $935, $318, S84 $75, S92 $24, Total Matured Insured Bonds $18,420, $6,280, $1,499, $475, Total LTGO Bonds $160,970, $54,999, $239, $13,138, $4,163, Notes (1) Cash distribution to be released directly to DTC. CUSIP is anticipated to be extinguished.