Municipal Bond Forum
Detroit plan subject to court ruling
Q
Excellent article (“Investors in Michigan Munis Strike Back“), clarifying the unintended consequences of the Detroit approach to bankruptcy. In addition to the obvious chilling effect this is having on the municipal bond market in Michigan, I reckon it is also having a negative impact on the broader muni bond market. If the current plan goes through, it is a game changer for muni bonds everywhere.
A
James A. Klotz responds:
We are not convinced that U.S. Bankruptcy Judge Steven Rhodes will rule that voter approved, general obligation bonds will be considered unsecured debt as outlined in the proposal by Detroit’s emergency manager. Naturally, we will be monitoring this situation closely.
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