Municipal Bond Forum
Detroit water supply revenue bonds
Q
Just wanted to know if the possible bankruptcy in Detroit will impact our holding of the Detroit Michigan Water Supply Revenue Bond. I’ve read that creditors were told about possible changes to the management of the water and sewage department that might impact the city’s ability to pay its debt on those bonds. Moody’s has now downgraded all bonds to below investment grade.
A
James A. Klotz responds:
Detroit’s emergency manager, Kevyn Orr, produced a 134-page restructuring proposal on June 14, 2013. It has not been enacted into law.
In his proposal, the $5.9 billion water and sewer bonds are treated as secured debt. He said these departments would likely be leased to a new regional authority that would then sell new bonds to pay off existing investors.
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