|Detroit Riverfront (source: Dvolatility)|
The city of Detroit today officially became the largest municipality in U.S. history to enter Chapter 9 bankruptcy after U.S. Bankruptcy Judge Steven Rhodes declared it met the specific legal criteria required to receive protection from its creditors.
Judge Rhodes: Detroit bankruptcy, filed in good faith, will continue (Crain's Detroit Business, might require login)
The city of Detroit is insolvent, and bankruptcy was a foregone conclusion — and should have been filed years earlier.
Judge rules Detroit may reduce pension benefits as part of bankruptcy case (Pensions & Investments)
Mr. Rhodes also ruled that Detroit may legally reduce public pension benefits under Michigan state law.
Susan Tompor: Easier into bankruptcy than out (Detroit Free Press)
Now how long does it take for Detroit to reach a deal with creditors and claw its way out of bankruptcy? It’s likely to be easier getting into Chapter 9 than getting out.
Detroit Emergency Manager Kevyn Orr delivers statement on bankruptcy eligibility decision (WXYZ)
Fitch: 2014 U.S. Local Government Outlook Negative, with Downgrades to Outpace Upgrades (FitchRatings)
'Willingness to repay debts has been a hallmark of the municipal credit market, but evidence of management's failure to prioritize debt service payments in a limited number of bankruptcy cases is troubling. Fitch expects the current bankruptcy cases to set important precedents for other distressed municipalities,' said Amy Laskey, Managing Director of Fitch's Public Finance group.
'If pending bankruptcy rulings demonstrate that pensions take priority over general obligation debt service, or require debt restructuring along with benefit adjustments, more cities may be encouraged to take this path. Fitch would likely re-evaluate the strength of the general obligation pledge in states where benefits are clearly placed ahead of G.O. debt.'
So munis are still distressed. By the way, Detroit's urban core is booming and interesting new restaurants keep popping up around the city. All Detroit needs is a safe rail line.